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.
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.
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.
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.
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 firstname.lastname@example.org