Newspaper article International Herald Tribune

Preparing for Market Turbulence ; Strategies for Investors as Clouds Gather over Global Financial Centers

Newspaper article International Herald Tribune

Preparing for Market Turbulence ; Strategies for Investors as Clouds Gather over Global Financial Centers

Article excerpt

Questions and answers about what investors should do as risk factors -- in Europe and elsewhere -- are likely to come back on the horizon in financial markets.

The coming months could be challenging for investors, as economic and market turmoil present risks to be managed. Chew Soon Gek, head of strategy and economic research for the Asia-Pacific region at the Credit Suisse Private Banking office in Singapore, spoke recently about how people with high net worth should be adjusting their holdings.

Q. Going into September, risk factors -- in Europe and elsewhere -- are likely to come back on the horizon. What should investors do?

A.We're still advising clients to overweight equities because of expectations of cuts in interest rates by the European Central Bank, among others. We believe that markets are headed for a short-term consolidation at current levels, and we retain a constructive strategic view on equities as an asset class over six to 12 months. We have reduced our positions in high-yield and emerging market debt from overweight to neutral on account of the strong performance this year, and now await confirmation of an improved economic outlook in the U.S. and clarification on the implementation of E.C.B. measures, particularly its bond purchases of peripheral European countries.

We have moved from underweight government bonds back to neutral, but over all remain underweight in fixed income as an asset class. And we have also moved from overweight to neutral on commodities, as global economic momentum has not turned positive yet.

Q. Do you think Asian investors fully appreciate the seriousness of the European debt crisis?

A.Clearly, Asian investors see and appreciate the risks to their portfolios, and many of the businesses they manage are impacted by changes in demand in the developed world, as well as currency volatility. Most client questions relate to likely outcomes for the euro zone debt crisis, the timing of key political and central bank meetings, and the adequacy of the bailout funds.

That said, many countries in Asia, particularly in Asean [the Association of Southeast Asian Nations, which includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam], have experienced strong domestic demand growth this year, and that has kept these economies and some of their stock markets well supported, in contrast to the situation in peripheral Europe. …

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