On March 23 fund managers and other experts returned to
Bali to address an invited audience at the Bali Hyatt as part
of Financial Partners International’s World Tour V seminar.
A deluge that day resulted in floods that led to many a phone
call and SMS telling us that people were stranded in their
homes! Nevertheless a good number of diehards were able to
surmount the watery obstacles and they were supplemented later
by a bunch of determined hashers!
Before we look at the experts’ latest thoughts on the
markets I thought I would review their comments on the previous
tour. Then they were predicting a positive year for the markets,
a shift towards Asia, a poor year for bonds and an initial
rise followed by a fall in the US Dollar. They were indeed
close to the mark so let’s see what they predicted this
time.
Global stock markets still positive
The fund managers were all upbeat about prospects for the
remainder of the year. John Goodlad of the Royal Bank of Canada
predicted a soft landing for the US economy and continued
growth in Asia. His predictions for market returns this year
ranged from 12% in Europe to 15% in the US and the UK. He
acknowledged however that things could go wrong if the US
housing market suffered a serious downturn resulting in a
recession or if ‘X’ factors such as the price
of oil or avian flu came into play.
Emerging markets
Howard Smith, Director of Investment at Quadrant International
Management in London, described how the G8 countries were
becoming less influential as the ‘new world’ of
developing countries grew stronger. China, India and Indonesia,
for example, were growing at twice the rate of ‘old
world’ countries. Where stock markets were concerned
he favoured India and Brazil as their markets are more established
and better regulated than those of other developing countries.
Property
The same speaker commented on prospects for the residential
property market where he saw a general slowdown. Trends tend
to be long ones and we could be entering a phase similar to
1989-97 in the UK when house prices hardly moved. (Writer’s
note: the speaker was referring to property in the west; no
attempt was made to predict the housing market in Bali!) Commercial
property, which had an exceptionally good year in 2006, can
still be expected to make around 8% this year.
Neil Jensen, Senior Vice President with Lloyds TSB, Hong Kong,
described how residential property markets were now being
supported by the availability of international mortgages.
The bank could now provide a mortgage of up to 100% for a
property in one country using the collateral of a property
in another country. Loans are also available for refinancing
or equity release and in ten different currencies at rates
varying from 1.78% in Yen to 6.45% in USD.
Currencies and commodities
Andrew McKay, CEO of Absolute Asset Management in Australia,
discussed the opportunities for profit in the currency markets.
It was important however to determine base currency, which
effectively means the currency of end use. He predicted the
US Dollar would continue to decline, particularly against
the Euro, which could rise to $1.40 in the next 12 months.
Sterling could rise to $2, something not seen in 23 years.
Major Asian currencies were also likely to rise against the
dollar as well as the Rupiah, provided the latter is not adversely
affected by a fall in interest rates. The speaker was still
positive on commodities, including gold.
Portfolios and risk
Finally there was a video presentation featuring an interview
with Craig Allen, an investment manager with RMBI. He described
the rationale behind RMBI’s strategic portfolios which
was to ensure that investors had the right asset allocation
in relation to their risk profile. He considered 2007 would
be a good year for stocks, commercial property and hedge funds
but another poor year for bonds.
Post script
In the course of the remainder of the year we will watch with
interest to see if the experts are right again. As always,
we should bear in mind that market predictions in the world
of finance can be thrown into disarray at any time by rapidly
changing conditions or unforeseen events. That is not an excuse
not to plan but a reminder to always be prepared for the unexpected.
Colin Bloodworth is a senior adviser with Financial Partners
International. The opinions expressed are his own. If you
have any questions relating to personal finance you may contact
him at 021 520 8099 or colin.bloodworth@financial-partners.biz
