Komfie Manalo, Opalesque Asia:
The emerging market crisis is probably not over, said Amundi Asset Management in its latest Cross Asset Investment Strategy research and added it was preferable to limit investment in these areas.
According to Amundi, investors should take steps to favour less vulnerable countries that have the ability to stimulate growth if necessary. They will gradually outperform the troubled group. Focusing on risks in each country instead of overall risk will once again begin to pay off, it added.
The research said, "Corporate profits in developed countries could be revised downwards due to the impact of exchange rates, particularly in Europe, which is a reason to be cautious with respect to risky assets in the short term. This revision of profits seems to largely be due to a one-off effect (transaction effect), and the fall in the markets since the beginning of the year has taken this partly into account. Over a year-end horizon, the eurozone equity market should still be able to hold its own."
Amundi explained the crisis reinforces some of its beliefs regarding focus, which is preference for domestic securities in developed countries. The decline in long-term rates (-41bp in the US, -32bp in the UK, and -29bp in Germany) is due to the crisis that took the market by surprise by its magnitude. Focusing on the long run is preferable in the current environment.
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