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Market research | 29
Market research
from Internaxx
June 2009
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.
Strategy: Positive week leads to neutral on equities
(source : Fortis Investments)
E
quity markets have risen in the have so far not been successful. Indeed, plans to left our regional allocation unchanged. Our
past week as the broad-based buy EUR 60 billion of bonds this week—a tiny underweight in bonds is due to underweights in
increase in producer sentiment amount compared to eurozone GDP—are government bonds and European inflation-
and improved industrial unlikely to make much difference. Though the linked bonds. We are overweight investment-
production figures in Asia risk of deflation in the eurozone exists, we are grade bonds and local-currency emerging
confirmed that the worst is waiting for the final inflation data for more markets bonds. Moreover, we are underweight
behind us. A number of indices insight about headline and core inflation. real estate and overweight commodities.
have broken through their 200-day moving In Asia, Japan’s 5.2% mom increase in Allocation: small caps moved to overweight
averages, which often acts as a resistance level industrial production in April was spectacular (source : Fortis Investments)
on the way up. We hit a stop loss on our and South Korea’s industrial production also Risky assets generally outperformed in May.
underweight in equities and rebalanced to a showed an impressive rebound. Emerging markets (+16.7%) strongly
neutral position despite our scepticism about Investors’ risk appetite has clearly increased in outperformed developed equities (+8.6%). For
how much further this rally may run. recent weeks. Equities continued to rise and both regions, this was the third consecutive
Though the second US Q1 GDP growth government bonds sold off. Emerging markets month with positive performance.
estimate improved only slightly, the underlying equities outperformed developed equities and Commodities gained 13.8%, with crude oil
data showed that domestic profits surged by high-yield corporate bonds fared better than prices up 32.3%. High-yield corporate bonds
26.1% qoq annualised due to a doubling of investment-grade bonds. Cyclicals such as returned 9.1%, investment-grade 6.7%. The
profits at financials as write downs slowed. energy and materials outperformed healthcare shift to risky assets hurt government bonds. US
However, data also showed that companies had and utilities. Though government bond yields yields rose by 34 bps, eurozone yields by 41 bps.
vigorously cut costs and that consumers are continued to rise, corporate bond yields fell, We remained underweight in equities. Given
saving the government transfers and tax breaks resulting in a sharp narrowing of the risk our scepticism about the strength of the
instead of spending them. spread. We do not think that government bond economic recovery, we think markets got ahead
In the eurozone, sentiment among retailers and yields will rise much further as they may push of themselves. (But as markets continued to
producers improved but consumer confidence up mortgage rates which could nip any rally, we hit our stop-loss level in early June and
remained weak. The money supply showed that stabilisation in the housing market in the bud. moved to a neutral stance.) We overweight
attempts by the ECB to reflate the economy We sold European inflation-linked bonds. We Europe and emerging markets relative to the US
www.investmentinternational.com June 2009 Investment International
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