On 16 March several leading fund managers flew into Bali
from the UK, Australia and Hong Kong to address a large invited
audience at the Bali Hyatt. Between them the managers control
funds containing hundreds of millions of dollars, some of
which belong to many members of the audience, so what they
had to say was of considerable interest to participants in
this second FPI seminar in Bali. What did they have to say
about world markets? I have taken the bones out of their presentations
and the salient points are as follows:
Global stock markets
All the indications are that global growth will continue this
year and this should be reflected in a sustained, albeit modest,
rise in stock markets. One speaker particularly favoured the
UK market but was less enthusiastic about the Japanese market.
Factors that could slow growth however are interest rates
and energy prices. These could particularly impact the two
major growth countries, India and Japan.
Commodities
One speaker pointed out that while much publicity had been
given to the rising price of commodities, they had not in
fact risen that much in real terms once inflation was factored
in. Most commodities were in fact more expensive in the 1930’s.
So there is still plenty of scope for further growth, particularly
if demand persists in India and China.
Property
As interest rate increases start to bite it is clear that
property prices are trending downwards in established western
markets. Should the fall in prices accelerate this would have
an impact on consumer confidence and consequently stock markets
but this does not seem likely in the immediate future.
Currencies
Questioned by the speaker, the audience was equally divided
as to whether they thought the US Dollar would continue to
fall or start to recover against other major currencies. His
own view was that the dollar would indeed continue to fall
due to the persistent twin deficits but that the inherent
strength of the US economy plus rising interest rates would
prevent the dollar from falling a lot further. Indeed in three
to six months’ time we could see the dollar starting
to recover. The speaker was not enthusiastic about the Euro
due to a number of fundamental weaknesses in the Euro zone.
The likely direction of the Rupiah was not discussed.
The role of hedge funds
One of the speakers described the role hedge funds could play
in providing an alternative investment asset which is not
dependent on the movement of traditional stock and bond markets.
Some people perceive hedge funds as being ‘risky’
but the objective of most of the funds is to produce ‘absolute’
albeit modest, returns that reduce the volatility of the average
portfolio.
Other issues
Also covered in the seminar were issues relating to changing
concepts in personal investing whereby matrices and models
developed by asset allocation experts were likely to replace
the haphazard selection of funds that exists today. The issue
of anti-money laundering regulations was also covered, a familiar
subject in this column!
The fund managers flew out the next day, impressed by the
level of interest and interaction in a location not usually
associated with the major financial centres.
Colin Bloodworth is a senior consultant with Financial Partners
International. The views expressed are his own. No investment
decisions should be taken without proper advice. If you have
any questions you may contact the writer at 021 520 8099 or
colin.bloodworth@financial-partners.biz
