ABN AMRO Private Banking expects a second wave of financial flows into emerging markets, as stated in the bank's new Investment Outlook published today. This development is driven not only by improving commodity prices, but also by the improving prospects for global manufacturing and consumer demand, which will benefit Asian emerging markets. ABN AMRO Private Banking therefore favours both emerging market bonds and equities for their return and geographical diversification potential.
"Mediocre growth is not fatal, and the political changes ahead are an opportunity to reshape the policy mix towards stronger growth potential", said Didier Duret, Chief Investment Officer of ABN AMRO Private Banking. "Active management can find ample opportunities in the large discrepancies found between equity sectors and regions, which is a better approach than predicting the next move in equity indexes."
The health care and information technology sectors are also favoured for their long-term profitability, global scope and strategic drivers, while consumer staples is attractive for its defensive characteristics. Sectors facing challenges in their business models (financials and utilities) are underrepresented in ABN AMRO's stock allocation.
Bonds are used in the role of insurance against adverse economic scenarios. Government bonds and inflation-linked bond strategies, for example, offer protection from the risk of recession or a surge in inflation. Commodities and real estate are overweighted. Commodities as an asset class has regained its role in diversification and real estate is attractive based on yield.
The US dollar is expected to remain in a trading range around 1.1 against the Euro.
The bank's balanced model portfolio displays a large buffer of cash with a tactical allocation of 23%, bonds are underweight (32%), alternative investment overweighted (15%) and equity is neutral at 30%.
The press release and full report can also be found on www.abnamro.com/en/newsroom