Pictet Asset Management, the investment management arm of the Geneva-headquartered wealth management giant Pictet Group, is warning against complacency in global markets amid easing US-China trade tensions and reopened negotiations over the UK’s withdrawal from the EU.
Pictet Asset Management, the investment management arm of the Geneva-headquartered wealth management giant Pictet Group, is warning against complacency in global markets amid easing US-China trade tensions and reopened negotiations over the UK’s withdrawal from the EU.
Luca Paolini, chief strategist at Pictet Asset Management, voiced optimism in emerging market assets while remaining neutral on equities, and negative on bonds.
In a note on Monday morning, Paolini suggested bonds are “extremely expensive” on both a relative and absolute basis, and instead favours emerging markets equities and credit.
Within equities, UK assets offer the best value within a generally overvalued global market, he said. An end to the Brexit impasse could bolster UK equities valuations, while light investor positioning could support a further rally, with sterling also strengthening following any resolution. UK companies could become acquisition targets for overseas firms.
“The UK market also provides greater exposure to sectors we favour at a global level: cyclical value stocks such as banks and quality defensives such as pharmaceuticals.”
Elsewhere, Pictet is resolute on EM growth. Paolini noted developing economies will continue to outpace developed nations this year, adding there is value in EM bonds, particularly Mexico and Russia.
“Consumer price pressures in EM economies should continue easing. Shrinkage in the inflation gap between the emerging and developed world will allow EM central banks to cut rates further in 2020,” he observed.
Emerging markets-focused hedge funds gained 11.67 per cent in 2019, reversing the previous year’s 10.94 per cent loss, according to HFRI data.
“EM real bond yields are almost 300 basis points above those of developed market bonds suggesting scope for further gains. EM currencies also look cheap against the dollar. We expect the greenback to lose ground next year which, in particular, should be a spur to EM local bonds.”
Pictet Asset Management, the investment management arm of the USD557 billion Geneva-headquartered Pictet Group, manages around USD192 billion in assets spanning equities and bond markets globally.
The firm runs an assortment of investment strategies including Agora, the European market neutral hedge fund managed by former Goldman Sachs equity long/short portfolio manager Elif Aktuğ.
