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Offshore banking | 31
Market
research from
Internaxx
This section is brought to you by the Luxembourg based online
broker Internaxx. Market analysis is provided by Fortis
Investments, the asset management arm of the Fortis group
Outlook 2009: skies to brighten packages should pave the way for economic Besides our call on emerging markets, we do
for global equities (source: Fortis recovery within a year. Other positives include not have a strong view on regional allocation
Investments) subsiding inflationary pressures and signs that for 2009. For now, we prefer the US to Europe
Equity markets fell sharply in 2008, bludgeoned the flow of credit is resuming. and Japan due to the defensive character of the
by slowing global economic growth, massive With analysts increasingly making their US stock market. However, given the underper-
deleveraging, weak earnings guidance by com- company earnings forecasts more realistic, the formance of Europe and Japan in 2008, the rel-
panies and initial signs of large job cuts. market should find a floor. In 2009, disappoint- ative valuations of these markets compared to
Financial markets discounted a lot of the bad ing earnings announcements are more likely to the US are becoming more compelling.
news, which in our view has left equities look- be met by indifference instead of the waves of Given that the economic recovery is likely to
ing attractively priced. Taking, for instance, the selling seen in 2008. But for investor confidence be slow and considering government’s much
price/earnings relative to growth (PEG) ratio, it to recover more fully, market volatility has to bigger role in the economy as well as the linger-
is at its lowest level in more than ten years. This ease, interbank lending volumes have to rise ing geopolitical uncertainty and the risk of
clearly reflects the risk aversion by investors and earnings visibility has to improve. deflation, we expect equity markets to regain
which marked 2008. We expect the financial services sector to be their composure only slowly in 2009. However,
In our view, there are deeply oversold com- at the forefront of a recovery. Well-managed, in view of the current valuations, there is
panies poised for a recovery; they should rally well-capitalised banks should emerge stronger potential for a gain of roughly 20%, taking us
as the sustainability of their earnings becomes from the turmoil and with the ability—for the back to September 2008 levels. In our opinion,
more widely recognised. There are other rea- first time in many years—to make profitable this is an attractive environment for long-term
sons to return to stocks that offer good earn- loans. Beyond this sector, we think that emerg- investors since there are unprecedented risk
ings visibility. There are, for example, ing markets valuations are becoming attractive premiums to be captured.
companies with strong business models and relative to developed equity markets. Emerging
fundamentals whose stocks are now trading in markets’ strengths have been overlooked in the Outlook 2009: global property
line with rivals that are weaker. Overall, this waves of global risk aversion and deleveraging. (source: Fortis Investments)
means investors should focus on stock selec- Admittedly, emerging markets could see fur- Global property markets have been dominated
tion, rather than country or sector allocation, ther corrections in the short term, particularly by extreme volatility caused by the deepening
in 2009. countries where household and corporate sec- credit crisis and worsening economic outlook
We see the downside risk to equities as limit- tors borrowed heavily in low-yielding curren- this year.
ed now that dividend yields exceed the risk-free cies. We have most confidence in countries While the credit crisis has affected all asset
rate of return. Furthermore, the authorities’ which matched economic growth with sensible classes, listed property has suffered more than
unprecedented fiscal and monetary stimulus long-term policies such as China and Brazil. most other segments of the market. This is
www.investmentinternational.com January 2009 Investment International
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