Strong economic momentum in the UK and successful government reforms in Japan will drive equity growth in both markets in 2014, according to Baring Asset Management.
The firm maintains a preference for UK and Japanese equities within the Baring Multi Asset Fund, and has increased its overall weighting in equities in the Fund due to bullish global economic developments. Barings believes that economic prospects for the UK are well supported while earnings expectations have not been subject to the same degree of over-enthusiasm that some parts of the world have experienced. For Japan, 2013 has witnessed an excellent performance from Japanese equities as the government’s policy of renewed asset purchases has taken hold.
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Andrew Cole, Investment Manager, Baring Multi Asset Fund, comments: "While the ongoing strengthening of Sterling as a result of better economic data and the prospect of rising concerns about a change in government ahead of the 2015 election could make us reassess our view on the sector, we believe UK fundamentals remain strong. We also remain positive on Japanese equities though the government now faces the delicate task of dealing with politically sensitive structural issues, such as the reform of the labour market. We are confident that government policy is heading in the right direction and that the necessary adjustments will be made. However, the first months of 2014 will be crucial for Japan and we remain vigilant."
Overall, Barings is positive on global economic prospects for 2014, observing that US economic data continues to improve with the recent government shutdown only stalling upward growth. The changeover in leadership at the Federal Reserve, with Janet Yellen assuming the role of chairman in February 2014, also suggests that monetary policy will remain in its current accommodative state. In terms of Europe, although the Eurozone has not shown the same growth overall, the German economy is still expanding and should help drive a regional recovery.
Andrew Cole adds: "Looking into next year, we expect the global economic recovery to remain on track, with inflation remaining benign. Central banks will look to become less active in their attempts to support the global economy, gradually reducing their asset purchase programmes over time. This suggests that bond yields will slowly IMPORTANT INFORMATION – BARING ASSET MANAGEMENT www.barings.com Follow us on at www.twitter.com/Barings Baring Asset Management is an international investment management firm with investment skills, clients and business locations spanning world markets. Our investment competency encompasses developed and emerging market equity, fixed income and multi-asset portfolio management services offered to institutions, retail investors and private individuals. Worldwide clients include public and corporate pension plans, government agencies, financial institutions, charitable organisations, mutual funds and private individuals.
Baring Asset Management is part of the MassMutual Financial Group, a global, diversified financial services organization. Massachusetts Mutual Life Insurance Company (MassMutual) is one of the largest life insurance businesses in the USA. This document is not an offer to sell or an invitation to apply for any product or service of Baring Asset Management. Issued by Baring Asset Management Limited (authorised and regulated by the Financial Conduct Authority).
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By GlobalDataThis Press release includes and is based on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. Such forward-looking information and statements are based on current expectations, estimates and projections. Important factors that could cause actual results to differ materially from those expectations include, among others, interest rates and fluctuations in currency exchange rates. Although Baring Asset Management believes that its expectations and the information in this press release were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this press release. Barings undertakes no obligation to publicly update or revise any forward-looking information or statements in the press release.
The value of investments and any income from them may go down as well as up. You may not get back all of your original investment. You should not make any assumptions about the future on the basis of this information. Past performance is not a guide to future performance. rise, as investors look to reduce their exposure to this asset class, in the absence of any major negative shock to economic growth." In the equity sphere, Barings believes that current share price valuations are reasonable, and can tolerate a small rise in government bond yields without overly damaging their potential for further growth.
As a result, Barings remains positioned for further outperformance in equities over bonds, although it recognises that equities are no longer quite as attractively valued as they were previously. With a higher weighting in equities in the Fund than at the same time last year, Barings has looked to provide some protection through the use of put options in case bonds witness a more dramatic rise in yields or if corporate earnings suffer greater downgrades than expected.
