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Benedicte Gravrand, Opalesque London:
The world economy is recovering quite nicely, according to Giles Keating, head of research at Credit Suisse at last month’s annual CFA Institute conference in London. But there is a tail risk to watch out for.
What’s more, equities look reasonably valued, and we should strategically be positive about them.
“Tightening fiscal policy, providing credits are available, will not affect economies negatively,” said Keating.
Indeed, industrial production in emerging market has picked up significantly since January-09 following a difficult year. The PMI (Purchasing Managers Index) new orders in the West and in BRIC countries, after a drop in late-08 and early-09, have now recovered to their previous levels. The same goes for U.S. lending standards and emerging markets’ car sales.
Europe
“Even Spain is improving; it’s only Greece that’s in the red,” noted Keating.
The main risk – the tail risk – is if the banking system is in trouble, according to Keating. Germany, France and the UK have high levels of exposure to PIGS (Portugal, Ireland, Greece, Spain) – and PIGS are at the heart of the problem. European banks’ problems are not feeding through to the real economy; and the domino effect has not been let in, as the ECB (European Central Bank) is holding it together and lending to Greek and Spanish banks.
Indeed the ECB...................... To view our full article Click here
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