of investors in
have had an allocation to domestic equity funds, with a negligible
global funds. Even though fund houses have been launching international
on a regular basis, the response has not been very positive.
of the view that the global economy is on a recovery path and
markets are expected to touch record highs by the end of 2012. In this
scenario, we advise our investors to allocate a small part of their
to these funds for the purpose of avoiding concentration risk to a
country i.e., India and take advantage of the upside potential expected
confidence about sustainability
of global economic growth, with
growing investor risk appetite. Year
2009 was the
turning point for world marked by the global financial
crisis, with first half of 2009 experiencing severe economic
second half being the start of an economic recovery. In 2010, the
economic recovery was substantiated as the World GDP rose by an
compared to the contraction of 0.60% in 2009.
In 2010, however, the recovery came
amidst a lot of nervousness in the financial markets, with most
worrying about the possibility of a double-dip recession. 2011 will see
continued recovery of the global economy, accompanied by growing
confidence of its sustainability and rising corporate business
earnings and revenue to be seen
in many major
countries. As the
economic recovery continues in the second full year, many key regions
countries will be witnessing record high earnings in 2011. Initially,
profit growth was driven partly by cost controls but, from 2011
several regions and countries are starting to see record high revenues
the recovery momentum to be increasingly broad based and sustainable.
to be the growth
drivers of the world. For
been living with the notion that US is the driver of global economic
However increasingly, investors would start to accept that going
various emerging markets especially China, are going to be the real
global economic growth. That is, even if the GDP growth rate in the US
uninspiring, the world can hum along.
policies to transition from an ‘easing mode’ to a
In 2010, as
investors and government fear a potential
‘double-dip’, there was a lot of
attention on the ‘quantitative easing (QE II)’ that
the US put in place. As
global confidence increases about the sustainability of the economic
fears of recession will be replaced by increasing fears of inflation.
This is particularly
important in the Emerging markets, including China and India.
2011 progresses, central governments
around the world will increasingly transition from an ‘easing
mode’ to a
‘tightening mode’. Long-term government bond yields
will start to increase (from
a long base), and many central banks will start to hike interest rates. This
will generally be seen as negative news
for stock and bond markets, but we do not think that it will derail the
positive environment for the equity markets.
of optimism about technology,
10 years on. 10 years after the
dot-com crash, investors
remained generally cautious about the technology sector. As a result,
year of record earnings for the sector in 2010, consensus spent a large
their time worrying about a potential downturn in 2011.
We believe that as 2011 progresses, investors
will become increasingly upbeat about the global technology sector.
recognise that many years of corporate under-investments has led to the
for businesses to start boosting their capital expenditures in the
sector in a more broad-based manner. Consumer spending in this sector
continue to be strong, after a robust growth rate in 2010, driven by
devices such as smart-phones and tablets.
Just as importantly,
we believe that
the valuation for the
sector will start to expand again, in line with
growing optimism towards the sector.
- Gold to
lose its lustre. The world has been
love with gold in the last few years. As 2011
approaches, predictions by many people of another strong year for gold
However, it is clear to us that the forecasts of a strong gold sector
becoming increasingly less fundamentally driven, since the genuine
gold has not been strong. Instead, the demand for gold has been driven
investment or speculative demand.
‘demand for gold’ story has been
driven by stories of ‘a
weak USD’, ‘the
need for a safe haven as different
kinds of crises continue’ and ‘the lack of strong
investment cases in other
asset classes’. As
2011 unfolds, we
believe that such stories will no longer carry
market currencies to strengthen
vis-à-vis US and Euro.
investment flows to
the emerging markets to be strong in 2011, in search of strong growth
yields. This should cause many emerging market and
Asian currencies to continue
to be firm in 2011.
positive views on the emerging markets and
particularly, the Chinese economy makes Mirae
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