European debts, US fiscal policy and moderate economic growth in China will continue to weigh on global markets this year despite subdued uncertainty, analysts said.
Amid these trends, global central banks will maintain their ultra-low interest rate policy in the near term, driving funds to emerging Asian markets, including Taiwan, where local currencies are undervalued and stock prices are attractive, they said.
“Global economic growth was constrained in 2012, and this will likely be the case in 2013,” said Philip Poole, head of macro and investment strategy at London-based HSBC Global Asset Management.
The US Federal Reserve is unlikely to stop its quantitative-easing operations any time soon, because the US is hard pressed to meet its goal of reducing unemployment to 6.5 percent this year, from 7.8 percent since September last year, HSBC said.
While the US has managed to avoid its “fiscal cliff,” it still has to contend with worsening fiscal conditions, with the process set to be bumpy and likely to affect investors’ risk appetite, Poole said yesterday in Taipei.
Debt-ridden Italy is scheduled to elect new members for both houses of parliament next month and Germany will do the same in June, Poole said, adding that the results would be an indication whether voters in the two European countries are supportive of austerity measures.
Against this backdrop, HSBC expects interest rates in key developed markets to stay ultra-low for at least another two years.
The company forecast a soft landing for China, with GDP growth of 8 percent to 8.5 percent this year.
“China’s potential growth is set to moderate over the next decade, as the economy matures,” Poole said.
Emerging economies are likely to fare better, although the pace will be less than robust, he said, adding the trend will put pressure on their currencies to rise against the greenback.
JPMorgan Asset Management agreed and said that the global recovery would be as shallow as “a soy sauce dish.”
“The economic recovery will not look like a Martini glass, or V-shaped” because downside risks remain, JPMorgan’s new Hong Kong-based chief market strategist, Tai Hui (許長泰), said in Taipei on Thursday.
Asian currencies — including the New Taiwan dollar — are more likely to rise than weaken, aided by their current account surpluses, Hui said, as the markets seek to interpret Japan’s vow to weaken its currency and stimulate economic growth.
However, Spencer Wang (王進彰), a vice president at Citicorp Securities Investment Consulting (花旗投顧), on Wednesday forecast that Asian currencies would take cues from Japan and depreciate to boost exports.
“All [the Asian] countries will adopt the beggar-thy-neighbor policy” to make their goods less expensive, Wang said, predicting the yen would fall to ￥95 versus the US dollar this year, from ￥89.127 yesterday.
An IMF report last month showed that the Taiwanese, Indian, Philippine, Hong Kong, Russian, South Korean, Mexican, Chinese and Malaysian currencies are undervalued in comparison with their purchasing power by 24 percent to 63 percent.