02/06/2011
By Ilonka Oudenampsen
A majority of institutional investors and corporate executives (86%) believe there are significant opportunities for growth in financial markets, but 58% think that there are major downside risks preventing them from taking advantage of those opportunities, according to a global survey by the Economist Intelligence Unit.
The Search for Growth: Opportunities and Risk in Financial Markets questioned 800 institutional investors and corporate executives and examined their views on the prospects for growth across a range of asset classes, sectors and regions, and their views on the likelihood and potential impact of 24 different scenarios.
Investors think that emerging markets will continue to offer the best outlook for economic and asset-price growth. Despite emerging markets equities being seen as the asset class with the best prospects, there are also concerns that investors could be over-relying on emerging markets. Two-thirds think that emerging market assets offer strong growth potential, but are concerned that some markets could be overheating, and almost half agree that investors are pinning too much hope on emerging markets.
All respondents believe that the global recovery will continue, but less than 25% think that it will pick up momentum over the next 12 months, while almost half say that the pace of recovery will slow in the coming year. This is probably reflecting concerns about the political unrest in the Middle East, the earthquake in Japan and worries about rising inflation, particularly in emerging markets.
Commodities are seen as second only to emerging market equities in offering the best opportunities for investment growth over the next 12 months, but again there are concerns about overheating. Respondents believe that commodities are the source for the next price bubble, and that the levels of risk are most likely to increase in this asset class.
James Palerma, vice-chairman and CEO of Global Client Management at BNY Mellon, who sponsored the study, said: “The survey shows that while a strong consensus among global investors has emerged on opportunities for growth, uncertainty caused by political, social and economic factors has led to inactivity and maintaining the status quo across a meaningful percentage of the investor base.”
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