14/02/2011
By Ilonka Oudenampsen
Asset managers expect growth over the next year to come from smaller Asian economies such as Hong Kong, Singapore and South Korea, according to a study commissioned by RBC Capital Markets and conducted by the Economist Intelligence Unit.
Asset managers were optimistic about Asian equity markets, with 69% expecting a rally over the next year. They were also more optimistic about the performance of European equity markets, with only 26% expecting the markets to fall, a significant shift from the 40% who expressed this view in the May 2010 survey. Three in ten expect a higher valuation of the Euro, versus 16% in the previous survey.
However, the managers were less optimistic about the U.S. equity markets (54% expect gains, versus 66% in the previous survey) and the dollar, with 53% expecting a devaluation, versus 24% in May. But 18% expects to see a reduction in inflation in their own country over the coming year, which was only 7% in May 2010.
Nearly three-in-four respondents (73%) said the smaller Asian economies have better prospects for growth in the next year compared to the year just past, followed by India (66%) and China (65%). Russia (51%) led the second pack, followed by Africa (44%), Europe (43%), North America (42%) and Japan (27%).
The asset managers surveyed were cautiously optimistic about the sovereign debt issues affecting Europe. More than half (53%) expect their own government will not experience a funding shortfall during the next one to three budget cycles or will be able to easily finance the shortfall.
Concerns remained, however, as 21% thought their country’s debt capacity is already under pressure, 4% thought it will come under pressure in the coming year, and 30% expected it will come under pressure during the next three years.
The U.S. is largely sheltered from such worries. More than three-in-four (77%) expected that the U.S. dollar will remain the dominant global reserve currency over the next three years, although that number drops to 49% looking out five years. Five years out, 20% expect the Euro to dominate, with 12% favouring the Chinese Renminbi. Only 36% thought there is a greater than 20% chance that oil will be priced in a currency other than dollars within the next three years.
However, 68% said that foreign holders of U.S. debt will face losses over the next three years, mainly due to higher interest rates or a perceived deterioration of credit quality. Slightly offsetting their concern for losses, 69% say that the U.S. can tolerate higher levels of debt than other countries without having its solvency called into question.
RBC Capital Markets commissioned the Economist Intelligence Unit to survey 461 senior executives, including 108 asset managers, from around the globe (38% from North America, 38% from Western Europe, 14% from Asia Pacific and 9% from the rest of the world) on their outlook for the future of capital markets. The respondents included 211 senior executives from commercial and investment banks, hedge funds, asset managers, pension funds, sovereign wealth funds, institutional investors and private equity firms and 250 executives from non-financial companies active in the global capital markets.
Other stories you may find of interest:
EC chooses Hewitt to carry out pan-European pension fund study
The European Commission has selected Hewitt Associates to conduct a feasibility study and advise on the establishment of a pan-European pension fund for researchers
Sophie Baker
The Universities Superannuation Scheme (USS) has chosen UBS Global Asset Management - Fund Services to provide hedge fund of funds administration services
EC's OTC Derivatives consultation met largely with praise from industry
The Investment Management Association (IMA) has welcomed the European Commission's consultation of OTC Derivatives, which aims to improve market infrastructure and to ensure an efficient, safe and robust derivatives market
