The global economic environment is likely to be significantly better this year than last year on the back of reduced risks from the US, Europe and China, a Standard Chartered Bank strategist said on Tuesday.
“The key theme for this year is the year of transition from ‘muddle through’ to a stronger and more sustainable growth,” Steve Brice, the British bank’s chief investment strategist, said at a media gathering.
The risks of a major US recession, the disintegration of the eurozone or China’s economy experiencing a hard landing have reduced significantly and will weaken further throughout the year, Brice said.
The improved performance of the US’ housing and stock markets would increase consumer wealth and boost personal spending, he said, adding that an easing fiscal situation in the US is likely to encourage private companies to increase investments.
As a result, Standard Chartered forecast that US economic growth could increase by 3 percent in the second half of this year and remain steady throughout next year.
As for China, the London-based bank adjusted its economic growth forecast for this year from 7.8 percent to 8.5 percent. It also forecast that Taiwan’s economy would grow 3.9 percent this year.
Brice said Europe was expected to come out of recession starting in the second half of the year on the back of scaled-down fiscal austerity measures, as well as steady growth in the US and China.
In terms of investments, Brice said equities were poised to be the most lucrative, especially in Asian countries, except Japan, because dividend yields from equities are higher than bond yields this year.
With more global fund managers increasing fund allocations to Asian markets, demand for Asian currencies will increase and keep them from dropping against other currencies, he said.
Therefore, investors could benefit from higher yields and appreciation of currencies if they purchase equities in Asian countries, with the exception of Japan, where the government is likely to pursue a policy of depreciation of the yen.
Meanwhile, Brice said he remained positive on commodities and precious metals, but downgraded his recommendation on gold in view of the negative effect that a reduction in quantitative easing policies around the world would have on gold prices.