JPMorgan Asset Management Ltd is advising investors to be cautious this quarter, but expects prospects to improve in the long term.
The investment consultancy yesterday said it was moderately upbeat about the current quarter in light of rising concerns over the Greek debt crisis, potential interest rate hikes by the US Federal Reserve in September and growing market volatility in China.
However, the long-term prospects of global markets look promising, mainly due to encouraging performance in the US, Europe and Japan, it said.
Investors should diversify their portfolios to capture opportunities arising from the anticipated global economic recovery, following heightened volatility this quarter, Hong Kong-based JPMorgan Asset Management chief market strategist Tai Hui (許長泰) said.
The upcoming Fed rate hike is likely to bring considerable volatility to the markets, he said.
Citing data compiled by JPMorgan Asset Management, Hui said that markets tend to plunge in the three months following a Fed rate hike and recover six months after the adjustment, with growth momentum easing a year after the change.
Despite the severity of the situation in Greece, Hui said that prospects in the eurozone are backed by solid indicators on unemployment, business earnings and favorable inflation, adding that the eurozone has not decreased its pace of buying sovereign bonds of member states.
As the Greek debt crisis unfolds, Hui said that the group of Germany-led European lenders has adopted a firm stance against the beleaguered Mediterranean nation to stem the rise of leftist factions in troubled southern European nations such as Portugal, Spain and Italy who might attempt to politically contest their debts.
As for Taiwanese equities, Hui said electronics companies still have favorable valuations, but their earnings are not expected to climb to the peak levels seen in the third quarter last year because of weakening demand.
In Japan, aggressive monetary easing by Japanese Prime Minister Shinzo Abe has left the market there awash with funds, representing a boon to the Japanese equity markets, he said.
For the China market, Hui said that recent volatility and declines have brought the country’s benchmark index back down to reasonably acceptable levels.
Long-term prospects in the China market are being bolstered by the government’s apparent willingness to progress toward capital market liberalization, attracting more foreign investment, he said.
As a result, investors may consider positions in China’s recovering real-estate market and in the construction and property development sectors, as well as blue-chip equities, he added.
Overall, equities are expected to continue outperforming bonds, he said, adding that investors should improve their portfolio holdings before seeking long-term growth opportunities in Japan, Europe and China.
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