Global bourses will remain volatile in the current quarter and beyond, as Europe’s debt crisis will continue to weigh on sentiment, driving capital to seek refuge in the US dollar and securities, analysts said yesterday.
After experiencing a tumultuous year, the world might only manage low GDP growth this year — with the US on track for sluggish recovery, the eurozone on the brink of a recession and emerging markets struggling to buffer the slowdown, said Lee Jih-jien (李志堅), executive vice president of Fubon Asset Management Co (富邦投信), a subsidiary of Fubon Financial Holding Co (富邦金控).
The US economy is expected to expand by a mild 2 percent to 2.2 percent this year while Europe enters a protracted period of stagnation, slowing the GDP growth of emerging economies to a range of between 5 percent and 6 percent, Lee said.
Central banks around the world are likely to ease monetary policies further to avoid a credit crunch and stimulate growth while sovereign debt problems unfold, he said.
Huge amounts of government debts are due to mature this year, he added.
“Reports of high yields will unnerve investors, prompting a sell-off of risky assets like equities,” Lee said.
Bond yields and prices move in opposite directions.
Weak sentiment accounted for the 21 percent correction in the local bourse last year, despite Taiwan’s relatively sound economic fundamentals, Lee said.
Risk aversion has shored up US shares and the greenback, in which global capital is seeking a safe haven, he added.
The trend is likely to consolidate in the first half of the year until export-driven emerging economies, including Taiwan, regain growth momentum in the second half, Lee said.
This backdrop also makes high-yield corporate bonds attractive because they promise a fixed income, he said.
Jordan Chen (陳朝燈), chief investment officer at Schroder Investment Management Taiwan, takes a positive view on local shares, saying the TAIEX might bottom out this quarter and stage a comeback from the second quarter onward, driven by restocking demand.
Taiwan’s economy might grow between 3.9 percent and 5 percent this year, with its investment outlook closely tied to development in China, Chen said.
Concerns over China’s liquidity and real-estate bubbles will have a significant impact on the local bourse, he said.
Chen recommended shares with high dividends, such as telecommunications service providers and handset makers.
Shares in tablet and light-weight laptop makers are also attractive investments, he said.