The world’s economy is unlikely to experience a double dip, Lim Say Boon (林哲文), chief investment strategist for wealth management and private banking at Standard Chartered Bank Group (SCB), said yesterday.
“The global economic recovery is intact,” Singapore-based Lim told a media briefing in Taipei.
He said the current spread between the 10-year US treasury yield and the three-year bond yield is “sharply positive” and nowhere near negative territory, which usually signals a recession.
The spread shot up from negative 0.8 percentage points in early 2007 to level out around 3.4 percentage points early this year — a sign that bond buyers are optimistic about the world’s long-term economic prospects, although any bad news could send the spread down, he said.
LONG RUN
Lim urged investors to stay in the equity market for the long-term. As short-term risk management, however, he advised investors to consider taking profits out of emerging markets and Asia (excluding Japan) because of their heightened valuation. Investors should also view downward corrections as a good time to buy or to switch to places such as relatively underperforming North America or Japan for gains.
The bank expects China, India, Indonesia and South Korea to hike interest rates in coming months and the Fed to do so in the middle of next year, pointing to a longer-term “sweet spot” in the US market, Lim said.
For the local stock market, Lim said the TAIEX appeared to be “getting tired and losing its momentum,” meaning it is not likely at this point to reach the 8,600 point level, where technical resistance was projected to emerge.
But in terms of its downward correction, the TAIEX would also meet support at its 200-week moving average (7,300 points) and should not fall below 6,600 to 6,800 points (its 100-week and 55-week moving averages combined), the investment strategist said.
Meanwhile, Lim suggested selling government bonds, which are trading at the cyclical bottom of yields, and buying investment-grade corporate bonds instead.
GOLD AND OIL
The bank remains bullish on commodities such as gold, platinum and crude oil, which it expects to average US$88 per barrel by the year’s end.
Lim said gold wouldn’t stay below US$1,000 an ounce for long, although its upside could be capped over the next 12 months, while platinum would likely outperform gold in terms of premium this year.
Expecting the US dollar to resume its weakness in the second half, the analyst urged investors to sell dollars at its rebound prices to reduce holdings.
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