財經觀察 1655 --- What the analysts think

What the analysts think

Published: January 5 2009 18:31 | Last updated: January 5 2009 18:31
Mohamed El-Erian, chief executive of Pimco
We enter a difficult 2009 with virtually all asset classes dislocated in terms of historical valuations. Yet not all are attractive. The key is to identify those that will have a catalyst for normalisation and still possess a certain amount of downside protection.

US Treasuries are my least favourite asset, but I’m also cautious of equities in industrial countries, which will continue to face significant headwinds as a result of sluggish global growth, capital dilutions, and shifts of funds by investors to less risky asset classes.

My outlook for markets is highly nuanced, and it calls for investors to adopt a differentiated approach incorporating both a quality bias and downside protection. Put another way, despite seemingly attractive valuations, this is not the year for the uninhibited pursuit of high risk opportunities. The time for that will come, but it’s unlikely to be in 2009.

Tim Bond, head of global asset allocation at Barclays Capital
I like credit as an asset class the best. I also like European equities, which are trading at or below book value and discounting a fairly savage decline in profits. But an equity rally is dependent on a credit market rally first.

My least favoured asset class is US Treasury bills, and I don’t like the dollar either. The Fed is increasing the supply of dollars, so it’s reasonable to expect the price will decline.

The worst case scenario for markets would be caused by a run on the dollar, terminating the Fed’s attempts to quantitatively ease and reduce credit spreads. The effect on global markets would be catastrophic, with most asset values other than gold collapsing.

Optimistically, I would hope 2009 is a market recovery year and I’d characterise my outlook as nervously constructive.
Stephen Roach, chairman, Morgan Stanley Asia
2009 will be a year of severe global recession, with plenty of downside risks to inflation and earnings. The key call investors will have to make is not so much on the shape of the recession, but what the contour of the subsequent recovery is likely to be.

Markets are still predisposed to anticipate a standard cyclical recovery, especially in light of massive policy stimuli. Hope springs eternal that a relatively short-lived downturn will be followed by a pretty solid U-shaped recovery.

To the contrary: my strongest out-of-consensus idea for 2009 is a realization that the world is now facing a multi-year slowdown. Any recovery in 2010 will be tentative and anaemic. In large part that will be caused by a protracted adjustment by the American consumer, which will impede the potential revival of other economies across the globe. That’s not to say we couldn’t see a rally in equities but I suspect any such rebound will be short-lived.

Ajay Kapur, chief global strategist at Mirae Asset Securities, Hong Kong
The only relevant question now is, ”Where is the next bull market?” My favoured asset class is equities, because valuations are attractive compared to normalised earnings, and there is powerful liquidity. The Federal Reserve has finally figured out the intensity of the potential debt deflation, and is using its own balance sheet aggressively to combat this deflation. The People’s Bank of China also understands the scope of the downward spiral and is taking credible steps to fight deflation. The ECB and the Bank of Japan are regrettably behind the curve, but they’ll be shocked into action. And there is cash on the sidelines.

Investors and analysts have suffered significant psychological damage and forecasts are a lot less bold than usual, but history suggests that after such financial devastation, markets do not move gently. They make large moves.

James Paulson, chief investment strategist at Wells Capital Management
This is a tremendous opportunity. I don’t care if its a stock or a commodity or a bond – outside of treasuries, it’s a remarkably good time to buy risk assets. If you’re looking at junk bonds you’ve never had this kind of value before, while stocks are cheap by a number of different value ratios.

The nervous nellies are out, so all this buying power is just sitting on the sidelines. As soon as it gets good again they’ll come right back in.

Meanwhile, policy officials across the globe are working 24/7 to get risk asset prices up, because if they can do that, the economy follows. The combination of value, fear and policy push is so rare – it’s like a huge insurance blanket under your investments.

What you’ve got going for you if you’re a risk investor is the restoration of value. Ultimately when the policy starts to work, the turnaround will be huge.