SEB report: Selective investments to create better value

8/8/2019 SEB report: Selective investments to create better value

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Investment

Outlook September 2010

piv bkig - ivm gy

i wh hfcl

ch clu





3Investment OutlOOk - september

Contents

Sagy

odcio ____________________________________________________________5

Say ______________________________________________________________Pooio agy _______________________________________________________

Th: A chag o gi i h Aica cooy ______________________ 11

Th: wh h acia io chag coo __________ 15

Th: A daiic wod _______________________________________________ 1

Maco ay ______________________________________________________ 21

CL

Eqii ______________________________________________________________ 23

Fixd ico _________________________________________________________ 2

Hdg d _________________________________________________________ 2

Ra a ___________________________________________________________ 30

Pia qiy _________________________________________________________ 32

Coodii _________________________________________________________ 3

Cci ___________________________________________________________ 3



4 Investment OutlOOk - september

Thi doc odcd y SEB coai ga aig ioaio ao i i odc. Ahogh h co i ad o oc jdgd o

ia, SEB wi o ia o ay oiio o iaccaci, o o ay o whao which ai o iac o i. i ach i d o,

yo hod i oi ad h o ad h dico coaid wihi i, o ad h dico aig o cic coai od o www../di-

cai. oaio aig o ax ay co odad ad ay o yo idiida cicac. odc odc a id o i.

Thi a ay a a w a i, ad hioic a o gaa o ; i o ca, o ca xcd h iiia ao id. Wh

ih d o yo i i cii doiad i a oig ccy, chag i xchag a ca iac h . Yo ao a oi o yo

i dciio ad yo hod away oai daid ioaio o aig h. Fo o ioaio a i aia h iid oc

o d ad ioaio och o d ad o cd odc, aaia a www... cay yo hod adic aiod o yo idiida

cicac o yo SEB adio.

i u x: A a co o o aioa Pia Baig ofc i Lxog, Sigao ad Swizad yo a oigd o

iod o h ax aica i h coi o yo ciizhi, idc o doici wih c o a acco ad acia aacio. SEB doo oid ay ax oig o oig coi aig ha yo yo oid cocd ahoii wih ioaio a ad wh qid.

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+ 6 6 [email protected]

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Ccl khGoa Had o Coicaio Ta

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Thi o wa ihd o S 4, .

co a ad o ioaio ad aayi aaia o S , .

Sagy




Decelerating growth in industrialised countries

has created uncertainty in inancial markets,

but changing market environments oer

opportunities or returns. Two key concepts

today are low valuations and exposure to

emerging markets.

Fiacia a a di y h gaio o a i h

a cooy. Wh h a cooy , a i ha ow

doig o a whi, hi ca caiy. Ma ha

acd a hy hod: i i ha i, aaio

ha a ad a a ha co a oc o aio.

Thi y o cooic io ca oh ooi-

i ad . Sa a co oad, ad oh

a co dicod y hioica a. Today’

og- od yid igh a xa o ch a .

Thi i wh w a oday. Soc a ha ay ow

aaio, ciay i aio o h o w o.

Go od a o xi; i oh wod, hi

yid a hioicay ow. Soc a a ow i a aaio

ia ha ha cad o o o a o a w

aadig o h aaio o qii. Th h i ha a

ya o oo , io wi ow dad a ch

high i i o owig qii. Th wi how

wha ha wh h cooic iaio io. Bxic ha a oo a a w aadig i dcad,

ohig ay ha.

ll wh

Wha i w oday i ha h wod’ ag cooy, h

Uid Sa, ha o o o i dyai ad i wighd

dow y hay d ad wa go ac. Thi wi

a a ow coy. Th Aica co – oc gad-

d a h wod’ gowh gi − wi o di h dad

o which w ha co accod. Ao w i h -

gowh g i w gig a (EM) coi. Th

ioac o h EM h i coioy icaig, which

ha ciay ca i h ix-oh ii o o

coai.

Coai wih a c ad good a i a-gowig

cooi, a w a h idi h coai og

o, a i a ca y h. Th cooic wod i diidd− daiic − ad wi ai o dig h oa .

Egig cooi wi coi o gow ad wi ica-

igy ad wih ach oh. Dad o h od ECD id-

iaid coi wi dci i goa ioac.

chag a io i o aiga oy i oday’

acia wod − diidd, ha dicod ad ay

-o. oii o xi i a a

caio. W hod h o o co oy di-

acd y ci, hod iad aiai a o id

ao wh o . Thi i wha w a yig o do i

hi i o Investment Outlook .

cll c c cd

o o o ioa cocio i ha a do di

cio i h US ad oh W coi i iy,

which ii ha h oa wod cooy wi gow y

4-4. c aay dig h x co o ya. Thi

a ha codiio i h oc a a agicay a-

aci, hogh h a i. May go ac

ajo ca chag, ad h i a i o w d cii

dicio i oh Eo, h US, Jaa ad wh

a oig od i gow i iz.

hig i woh ig i id: i ha ad i Eo

ay ca o iod oh Eoa cooic -

oac. addiio, a ci ay occ dig iod

wh gowh i good, which i h ca a goa . Thi

oid a dg o ho ha a wi aii ad ca

gaday gi o dico cooic gowh.

Hans Peterson

CIO Private Banking and Global Head o

Investment Strategy

iduc

Generating value even in times o uncertainty




Say

xcd 1-y

igu ik

quii 9% 17%

PositivE.The prevailing high risk premiums are one argument or equities, but uncertainty about

macroeconomic perspectives is hampering investor willingness to take risks. Companies with exposure to

growth, such as emerging markets and capital goods, should perorm well in the prevailing range trading.

ixd icm 6%* 6%

nEgativE towards government securities,PositivE towards High Yield. The macro map indicates continued low

key interest rates and government bond yields in Western countries, making government securities unattractive.The yield spread over Investment Grade has also narrowed, and rom a risk/return standpoint High Yield is nowby ar the most attractive. Emerging market (EM) debt also remains appealing due to high yields and possible

exchange rate appreciation.

dg fud 7% 6%

PositivE. Continued ocus on strategies with sources o returns other than the stock market. Global Macro

and CTA strategies should perorm well in volatile markets, while Event Driven is likely to beneft rom

increased merger and acquisition (M&A) activity. Continued arbitrage opportunities make Credit L/S and

Distressed strategies attractive.

l 4,5% 3%

nEutral/PositivE. Continued economic recovery still avours this asset class, but the real estate market

will recover more slowly. Hard-to-interpret housing market data and prevailing macro uncertainty are uel-ling uncertainty and risk.

pivquiy 15% 22%

PositivE.This asset class took a beating during last spring’s fnancial worries but still has a 0-0 percent discount on already conservative net asset values. New regulations may trigger new ows, making the

secondary market attractive.

Cmmdii 6% 18%

nEutral/PositivE. At present, risk appetite is driving the market instead o undamentals. Looking ahead,sustained economic recovery will boost demand or industrial metals, while low interest rates should

urther beneft gold.

Cuci 3% 3%

nEutral/nEgativE**.As worries about a US and global double dip recession ade, interest rate dierentials

will once again drive currency ows. High interest rate (EM) currencies will strengthen against low interest

rate currencies in developed markets (DM) as risk appetite returns.

* Expected return on corporate bonds that are weighted about / Investment Grade and / High Yield.

** This opinion reers to the alpha-generating capacity o a oreign exchange trading manager.

XpCD ik D U ( y OiZO)

iOiCL ik D U

(UgU , O JULy , )

Cg i OU XpCD U

Equities

Fixed income*

Hedge funds

Real estate

Private equity

Currencies

Commodities

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0% 5% 10% 15% 20% 25% 30%

Expected volatility

E x p e c t e d

r e t u r n

Hioica a a ad o h oowig idic: Eqii = MSC AC Wod. Fixd ico = JP Moga Goa GB Hdg. Hdgd = HFRX Goa H dg Fd. Ra Ea = SEB PB Ra a. Pia qiy = LPX. Coodii = S&P GSC TR. Cci = BacayHdg Ccy Tad.

-4%

-2%

0%

2%

4%

6%8%

10%

12%

14%

16%

2 0 0 8 - 1 1

2 0 0 9 - 0 2

2 0 0 9 - 0 5

2 0 0 9 - 0 8

2 0 0 9 - 1 2

2 0 1 0 - 0 2

2 0 1 0 - 0 5

Equities Fixed income* Hedge funds Real estate

Private equity Currencies Commodities

Fixed income

Equities

Private equity

Commodities

Real estate Hedge funds

Currencies

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

0% 5% 10% 15% 20% 25% 30%

Historical volatility

H i s t o r i c a l r e t u r n

iOiCL COLiO

(UgU , O JULy , )

E q u i t i e s

F i x e d i n c o

m e

H e d g e f u n d s

R e a l e s t a t e

P r i v a t e e q

u i t y

C o m m o d i t i e s

C u r r e n c i e

s

Equities 1.00

Fixed income 0.0 1.00

Hedge unds 0.5 0.0 1.00

Real estate -0.1 0.00 -0.01 1.00

Private equity 0.1 -0.1 0.5 -0.1 1.00

Commodities 0.3 0.12 0.53 0.00 0.32 1.00

Currencies 0.01 0.33 0.1 -0.0 -0.0 -0.05 1.00




Say

Wig i mOD pOCiO

Wig i mOD gOW

2%

5%

0%

0%

2%

7.5%

83.5%

0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current

5%

4.5%

4%

3%

2.5%

26%

30%

25%

0% 10% 20% 30% 40%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current

Wig i mOD ggiv

OLLig -mO COLiO

v. mCi WOLD (U)

3.5%

0%

5%

10%

0%

21%

25.5%

35%

0.0% 10.0% 20.0% 30.0% 40.0%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities

Previous Current

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

2002 2003 2004 2005 2006 2007 2008 2009

Fixed income Hedge Real estate

Private equity Commodities Currencies

m: Cgig gi i miC

COOmy

Investment Account, Change in Private Inventories, OverallInvestment Account, Private Fixed Investment, NonresidentialInvestment Account, Private Fixed Investment, ResidentialPersonal Outlays, PCE, Overall

Source: Reuters EcoWin

2000 2002 2004 2006 2008

-5

-4

-3

-2

-1

0

1

2

3

4

5

C o n t r i b u t i o n s t o G D P ,

p e r c e n t a g e p o i n t s

-5

-4

-3

-2

-1

0

1

2

3

4

5

m: DULiiC WOLD

National Income Account, National Product Account [ar ma 1 quarter]

National Income Account, National Product Account [c.o.p 4 quarters]

Q1 Q3 Q1 Q3 Q1 Q3 Q1

2007 2008 2009 2010

-7

-5

-3

-1

1

3

5

P e r c e n t

-7

-5

-3

-1

1

3

5

During the past year, the inventory cycle (green) has been a crucial

growth engine in the US, but now other orces must take over in order

to avoid a new recession. They include corporate capital spending

(blue), residential construction (brown) and private consumption

(lilac).

The American economy seems to be accelerating i its growth is meas-

ured year-on-year, largely because the rst hal o 2009 was character-

ised by a deep economic slump. But on a quarterly basis the economy

has decelerated, reecting a weaker cyclical upturn.

Ch h c c: h US wi aoid a do di cio, oidd ha dyig dad

ica

i wh h cl ch clu: A oc o a wih aiiy i h o o ow aaio ad

a

dulc wld: Mico ad aco c di ac o cooic i

Source: Ecowi




pl

mOD pOCiO

Th acia daa ha ga a i Ai coid

hogho h . Wod oc xchag oac

wa oai, wih a gai i. Dig h iod May-

Ag, h MSC Wod dx i oca cci wa dow

. c a o. A o cocio ad h -

c, i cod dow ao c o h iod.

Fixd ico a w o ad o h c

i ay way. A h co o a woi wa h acia

gh o wa o idiida coi, which cad

io i h oig xchag a ad a igh o h

a go od a h x o cooa od

ad h go cii o aciay wa coi.

B ahogh o o h xd ico ooio i Mod

Pocio coi o i wih ho- aii,

h o yid i oo ow o o h dow i o ca-

io i a.

Di h a c, Mod Pocio wa .

c (NAV i SEK o Jy ) dig , w coi-

oy -xai o hodig. Dig hi iod,

w had h ooiy o dy o aci i ada

coy. Thi d o o chag i h xd ico ooio.

W dcd o oiio i h ow- g i

ao o o “cah ” ad “ao ” cii.

W y cooa wih o choic o aag, ad

w ha idc ha hi aag ha wod

xy w o a ooio ci, ad o oy a

idd aag ada.

Ccy a o w ah ag dig h iod.

Th o wad y 8-4 c agai ch ccia h CHF, GBP, JPY ad USD. Ahogh cai cocio

occd, h o w coy o o aci ccy

aag i Mod Pocio. W a h icig

o cci a a a ca, ic h o w

a i oo daaic o o a, ad o oc h ooio,

w cho o ac ha o Miaag Ccy hod-

ig wih a ow-i ccy agy. Th hdg d oio

o Mod Pocio aid di, wih Ma Na

xo oy. Uoay w ca ha h coi-

io o h i did o ach o xcaio.Th daa ici o h hdg d ooio i o

ha hodig wih ow xcd oaiiy ad a y

o aag agi ha di i h did

dicio. Dig h ig ad , w xicd a

did high coaio i o o o Eqiy Ma Na

d. W od i o ad ha iad adod w a-

gi: Goa Maco ad Miagy. Th ay acay ha

owha high oaiiy, w ca ha hi coa-

io wih oc a i aica wa .

Looig ahad, w wi do a o o i o aayi ao

hdg d ad “cah ” d. iw o High Yid

cii ha co o oii, ad w ay ica o

hodig i hi g. A h a chag, a w o-

a i a caid o.

Turbulent markets, but Modern Investmentprogrammes are stableConcerns about a possible double dip recession drove many investment markets in the second

quarter as well as through the summer. This resulted in turbulent markets. During this period, we

chose to increase the cash portion o our programme portolios in order to reduce risk. The risk

diversication we achieve by investing in several asset classes provides good protection. Hedge

unds and High Yield bonds, or example, have oered good downside protection. On the whole we

are satised with the nature o these programmes.

2%

83.5%

2% 5%

7.5%

Cash

Currencies

Real estate

Hedge fundsFixed income




mOD gOW

Th cod qa o ad o o h w

doiad y woi, a coiig o a ha goa

gowh wod had y go dg aiy.Thi gaday hid o dad o a wd goa cio.

Uxcdy wa US cooic aiic a w a q-

io ao Chi gowh ghd h ag o

h o widy d cooic o h − do

di − aig ha h wod (o h US i aica) wod

id io aoh cio wihi oh o h io

o.

Eqii, ia qiy ad coodii w h wa-

oig a ca dig h iod. W ad aio

chag i o ha ooio ad o aayi o o

d aay, h ghd a aady o ooio. hahodig ao did xy w coad o h

oa oc a, ha o oh o choic o h igh

aag ad o xo o gig a.

ao g, w did o ciay ga da-

ag o ih coodii o ia qiy ih, ic

ogh hi wighig i Mod Gowh i ao 7 c.

W wi ai hi xo, ic o a i ha h

cia o g ad acqiiio i aoa (o ia

qiy coai) ad ha i a ighy og ci,

coodii wi coi o o ca chag

ad dad o gig a. W a acig o

coodii ETF wih a aciy aagd d ha, i o

jdg, ha good oia o a dyig idic.

Cooa od w h y h igh o a go-

cii ha a c gad. W ha

h cho o h xd ico oio o h

ooio wih go cii o gig a

coi. W a icig o o iw ha h i-adjd

oia o h cooa od g i high. W

ha cy ao a d owad dcoig o

h oc a, aig h g o aaci.

Moig coc ao a do di cio o co

icd caiy ao cooa o, awhiw a ig a ady dci i acy i. Coad

o oh od a, yid o cooa od wih o-

wha ow cdi aig ao o aaci. H, oo,

w ha ood o xcd ad a h chooig

o ica o High Yid hodig y addig o o od

d. Thi i ig acd i a o h ag cah

w i dig h ig ad , ad i a o

h hdg d oio o Mod Gowh.

Ccy a o w ah ag dig h iod.

Th o wad y 8-4 c agai ch cci

a h CHF, GBP, JPY ad USD. Th o ady a-cd h cci a ca. J a i Mod Pocio,

w cho o ac ha o hodig wih a ow-i ccy

agy. W a doig h ach o addiioa oig

xchag a coc ha ay coi

o h ooio.

May, wh oaiiy o hay, a o hdg d

doad a iia gai gowh a ad coa-

d igicay o ha did, ahogh hi o

w a a ha ho o qii. J, oio o o

hdg d hodig cod aiy w, whi oh

coid o o gaiy. No ajo daa, i od

o aoid ig dd o oc a do, w

cho o o Eqiy Log/Sho hodig. Ad ic w a

diaid wih h ha o Ma Na agi

ha did, w a dcig h hodig ad gaday

acig h wih Goa Maco ad Miagy. W i

ha a oii iw o hdg d, ahogh w ha adj-

d o xcd ighy dowwad. W a icaig

o oc o h choic o agi, which w i wi

o ga ioac ahad.

Pooio agy

2.5%

3%

5%

30%

25%4.5%

4%

26%

Cash

Currencies

Commodities

Private equity

Real estate

Hedge funds

Fixed income

Equities




Pooio agy

mOD ggiv

Mod Aggi d h a ad iac oh aio i a ca a h Mod Gowh ooio,

dow i h qii ad ia qiy oio w

o daaic, ic hodig o h a ca coi

a ag cag o o oa aocaio. J a i Mod

Gowh, w ha ad o chag i o hahodig

ad o d aayi. W agiay icad o ha-

hodig i gig a, coad o a a.

a i ha gowh i h a o h wod wi

io o ha o a a. Mod Aggi,

w h da o ica h ooio o oa hodig i

hi hioicay ii a g. Th oio o Mod

Aggi coiig o qii ha doad y good

ooio chaaciic, ad o hodig ha odxy w i coaai . Dig h iod, h

MSC Wod dx ad i o o . c, whi

o qii ooio dcad y .7 c i h a

ccy.

Sic o a i ha h cia o acqiiio ad

g i aoa, w a aig o ia qiy hod-

ig iac. W icad o xcd o coodii

ad a h oig o hodig o i oigia c

o h ooio. W a doig hi y addig a w aciy

aagd d ad acig o ETF wih aci coodiy

aag.

Th xd ico oio o h ooio − which agy co-

i o High Yid cii − wa h y a ig’ a

c, w gad h yid o cooa od wih

owha ow cdi aig a aaci. W ha aoadjd o xcd wad ad a coidig

icaig o hodig i hi g wihi h a .

Whi h i ga caiy ao cooa o a

woi ao a do di cio o, aci a

adiy dcaig (o xa h w oy wo a-

ci i h High Yid g i h US dig J).

hdg d ooio ocd ac qi icy dig

J ad Jy. May, wh a oaiiy o hay,

a o hdg d doad a iia gai

gowh a, coaig igicay o ha did.

od o aoid ig dd o oc a do-

, w cho o o Eqiy Log/Sho hodig. Wa diaid wih h , ciay i a iig a,

ad wi ac h hodig wih oh y o agi.

W wi ao ica o dca o xo o h oc

a wih h h o oa qiy a d wh

w coid hi ia. Exi aayica wo o hdg

d ad hi aio chaaciic ad haio i c-

y d way.

A o, h cah hodig i Mod Aggi achd

ao c dig h iod. Thi wa aiy ca

w aaid o iig wh h a cia dio-

ad. W a chooig o gaday i hi iqid-iy, wih a caio wai-ad- aid.

21%

10%

25.5%

35%

3.5%5%

Cash

Commodities

Private equity

Hedge funds

Fixed income

Equities




h:

ch

h c

c

•The deceleration in the US economy since last

spring…

•… has increased worries about a double dip

recession

•History and the prevailing demand outlook

clearly indicate this is unlikely

Th ay i i a a a ig wa iaiy d

y iigy good coay aig ad high gowh

xcaio, oh aog aco oca ad a ay-

. Fo h i ic h coy ga hoy a

id-, a ay id hi ooo oha acocooi did. B i id-Ai, h Eoa

oig d cii io ow. Thi d o a og,

ag ic dci o i a, wih qii o ooig

o i ay Jy.

iiay, acia a woi i J i ocd o go-

ca o ad h hah o h Eoa a-

ig y. B h coc add wh a coi

− ciay Gc, Sai ad Poga − achd iza

dg-ighig oga. Ma ao id h

o h o Eoa a.

Fo hi ao, h oc o a woi od aco h

Aaic o h Aica cooy, which wa h ao odca hay, accodig o o aiic. a

J, h “do di” coc h aad qy oh

i h dia ad i aay o h US cooic ooo.

Dig Jy ad ay Ag, how, i ai i -

acia a odd ha o iigy a

Eoa cooic w, og aig o o co-

i aod h wod, caio ha Chia − i o

o igoo aioa aco daa dig h − wi

i cooic oicy away o a ighig ia, ad

ha o h gowig iihood ha h US Fda R

(Fd), wi qaiai aig hogh ag-ca

Tay od cha.

c uw im

Wa US cooic daa ao doiad h a

iod, ic xcaio o hi icaio had

owd, dowid i w diig o h

a ha dig h a ig. Nh, day wh

xcdy wa Aica cooic g w od

w gay chaacid y aig ha ic o US

oc xchag.

Heavy odds against double dip recession


Jan

2010

Mar May Jul

M S C I W o r l d I n d e x ,

l o c a l c u r r e n c i e s

290

295

300

305

310

315

320

325

330

335

340

345

CgbL OCk mk

W i p Umm

The late June bear market, caused by in-

creased concerns about a US economic slump,

was ollowed in July by splendid stock market

weather, mainly because o ewer worries

about government nances and strong Euro-

pean macro data. In August, the stock market

ell again in response to ears o a US double

dip recession.




Th: A chag o gi i h Aica cooy

By ay Ag, aco xcaio d o ha ad-

jd fciy dowwad, a cd i a og oii

oc a acio o Ag wh h Jy SM cha-

ig aag’ idx o Jy a i ha iad. Thiwa h i i wo oh ha ioa US cooic

daa caayd a igica oc a wig.

B hoy awad, h iaio chagd wh a i o

Aica cooic o − icdig ao a, ai

a ad ho cocio daa − ho o dicio

whi h Fd owd i cooic oca. Dig -

q w, iigy dowa aco w doiad

US a; h ad dci oad, iiia oy

iac cai o o hi high ic a

, h Phiadhia Fda R xcdy od

dciig idia aciiy, aacig od ooigd o o hay, w ho a gd o a a-i

ow ad o o. A a , h “do di” wa oo -

ig had agai ywh.

Th aig o h “do di” i aigo (h

i o ofcia diio). B aig ha i o a w

cio i h US cooy − ay iyig a a woqa o aig GDP − ha a a a oh a

h io cio, h a i h wa a do di

cio wa i 8-8 ad o ha i . h

a ya, h US ha h xicd oy wo ch

cio. E ooig a h cooic hioy o oh

coi, h hoo a; i 4 idiaid

coi ha codd a oa o 8 cio dig h

o-wa iod, do di cio ha occd oy ix

i, o o h i ad.

A hoig a , hi i aig -i

ogag, wa h daa ca o h daaic a-

cia ad cooic cii i h US − ad wh i h wod

− ha doiad 8 ad a o . qio ha

aay ai i whh do di cio ha ay

oowd i h wa o hoig .

H h aiic how ha o o h 8 ajo coad − ho ic dci xcdig c − i h

idiaid coi o h ECD ic h ay 7

w oowd y a do di cio. Wha ha iad

yid iod a h ig o hoig a

ha a ya o ow gowh ad ag id cooic

caaciy, which ogh ha aid h godwo o ow

iaio ad ow i a.

Dul d whu c

Th a cycica a i ao ha a iiiay aid wig

i oowd y a dcaio, iia o wha i ow ha-

ig i h US − a id o do di wiho a cio. iao o o a ha a xcio ha i a ch a

qii, cooa od, hdg d, ia qiy ad

coodii a wa ha oc h coy ha

d way o a w qa. Ad a a whi, a h

cooy ha ogd h, h ic o i a ha

gay g a w ha.

Hioica oaiii h idica ha h US i o o h

g o a w cio. B ca a do di ha,

wih h odd acd agai i?

Sic h a Aica cio dd a i h

o (hogh o ofcia daig o h cooic cyc ha

d y), aaid Q/Q GDP gowh ha

.6, , .7 ad .6 c. Thi gowh o ha iay

aia o h dg o i o h ioy

cyc ad ca a. Fo h hid qa o o

h qa o , h oc accod o ay

c o oa GDP gowh, ad dig h cod qa

o o ao c.


2000 2002 2004 2006 2008 2010

I n d e x

-40

-30

-20

-10

0

10

20

30

40

vL i piLDLpi iDX

Contrary to the anticipated acceleration, industrial activity

in the Fed’s Philadelphia district ell markedly in August.

Many other American macro reports were also unexpectedly

weak, uelling worries about a double dip recession.

ar ma 1 quarter

2000 2002 2004 2006 2008

% Q

/ Q

a n n u a l i s e d

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

2010

COvy by iFiCiL piiO

Virtually all US GDP growth during the second hal o 2009

and early in 2010 was due to temporary stimulus eects.

Now that these actors are leading to slower growth, nal

demand must take over as the economic engine.

Source: Ecowi





Th oa i c i h Aica cooy i h

i h oc o adig ad i iy o gai aig

i h hid qa o . Th ao i ha h ac o

ioy id- i cay owig − h cod diai(chag i h ac o chag) i ig gai − whi h

gowh i o ca oicy wi ao chag o o

i.

No wi hi hi o accaio o dcaio c

oay. ad, a idicaio a ha i wi doia h

cooy o h x w ya. oi ay occaioay

a a oay oii coiio o gowh,

h d o igh ca oici i od o hi h

da dg dci wi ha a og iac i h o-

oi dicio.

Udl dd u w

Dig h aid o , h aag gai c o

h aco ca iad a ao c o GDP, ad

dig aod . c. od o h US o aoid

a do di cio ( GDP o aig), dyig

cooic dad − dad ha i o dd o i-

oy c ad ca i − gow y o ha

cag oi dig h cod ha o .

od o achi SEB’ oca o a GDP ica aagig

j ow c (qa-o-qa aaid gowh)

dig h cod ha o , dyig dad

coqy gow y ao c. B wh wi hi

dad co o?

wi hady co o h ic co. Fo o i, US

doic oiic ha doiad y gowig dicod ad

y Rica a o o o day o. Th i ao

diag a o whh h cooy acay d -

h i, o whh -ighig i qid iad.

Th Rica oo h ca i ad ao q-

io h iz o h oii iac o ai i ac-

ag. E aog Doca ad h ga ic, h a

ao do ao h d o w dg a o o

h cooy.

Th ca d h o wigig owad -

o o ga aiy. ai idicaio o hi a ha

Pid Baac aa’ a o aoh ag-ca i-

acag dw adica c ad ha h xio ooy o w wa hd hogh oy

wih ga difcy.

Pid aa’ ic aoa aig ha ao a

hay. Thi i joadiig coid Docaic coo o

h Ho o Rai oowig h No co-

gioa cio. Wih a wad id, Wahigo

i oiica aayi i h a idia

cio. Th oo i i h ha i h oiica

adca ha ad i o difc o a US ca oi-

cy, h a ay idicaio ha h wi o h

addiioa i o a o dig -. Looigh ahad, US oiicia − i ay − ac iza

co-cig d.

p c wll huld l

h ia co, how, h i oia o a

gowh i dad dig h coig ya.

Fi, oh og- US od yid ad ho- a

i a ha a o hioicay ow . Di

i aciaio ic h giig o , h US doa i

i dad agai h o o h ai o chaig

ow aii (PPP). Fiacia codiio a h ay

iai, which wi ia co dad.

Th Fd’ a Sio Loa fc Sy o h US a-

ig y i ao howig a gada aig o dig

ad high dad o oa i o d o i.

addiio, w xc h Fd o a i y i a − h

da d a − chagd a a cod-ow -.

c i . No hod w o h oiiiy ha h

Fd wi qaiai aig a hi ya. a, hi

idica ha h ow i a io i h US wi

coi o og ha w ioy ocad.

Investment Account, Change in Private Inventories, OverallInvestment Account, Private Fixed Investment, NonresidentialInvestment Account, Private Fixed Investment, ResidentialPersonal Outlays, PCE, Overall


2000 2002 2004 2006 2008

-5

-4

-3

-2

-1

0

1

2

3

4

5

C o n t r i b u t i o n s t o G D P ,

p e r c e n t a g e p o i n t s

-5

-4

-3

-2

-1

0

1

2

3

4

5

im FO O gOW gi

O k Ov

During the past year, the inventory cycle

(green) − a shit rom a large-scale inventory

run-down to a build-up − has been a crucial

growth engine in the US economy, but now

other orces must take over in order to avoid a

new recession. These include corporate capital spending (blue), residential construction

(brown) and private consumption (lilac).





Scody, a ya Aica i c hi caia

dig o ch ha hy agy cod oy wa-ad-

a (dciaio). (xaio i), ca-ia dig oad a ao gigi .7 c o GDP,

h ow ic h Scod Wod Wa. h cooa

co, h i h ao o aicia a wig i caia

dig. Thi ha i ac g, jdgig o cod qa

aiic (+7.6 c qa-o-qa, aaid).

Thidy, idia cocio ha a o a xy ow

, oh hioicay ad acoig i h hoig dad

ig o h ha o h oaio yaid (do-

gahic). Th i a ag y o od ho a h a-

ioa , hi ay iadig. o gio h

i idd a oy o ho, i ay oh h

i a hoag − o ao o h a ig ha Aicao ay o.

Wu cu cl d

Fohy, hohod ha c ac daaicay o yig

caia good; cha o ca, i, ich qi-

ad o o o . c o GDP a ya − h hid

ow ic h Scod Wod Wa. A wih i

caia dig, h hod h ao - dad

h.

y aco i wha ha o h hohod aig aio

(aig a a cag o dioa ico), which hacid o ao 6 c o ao c a h d

o 7. h aig aio do o ica h, o i i

dci, hi wi ao ch cha a co caia

good. Th aig aio i a i high ha i ay i wh

oa hohod aac h ad ico a oo

h way hy do ow − a idicaio ha h aig aio ay

oiy a owha.

Eoy, i , i a y aco o oh ico ad

hohod i − wo ioa ia coio

aa − ad o a h d ha wa. Thi i whyay o ha dd o h xio “jo -

coy”. Y i h ia co, jo gowh ha o a a

wih h jo gowh dig h - cycica coy,

ad w ao ha o h coy. Looig a i h

ahad, hiig wi ao ica wh i ca o og

qz h xiig wooc h (odciiy a) i

od o a dad ad ay ioy id-.

dul d c

Jdgig o hioica xic a w a h cy

aiig dad ooo i h ia co, o coc-

io i ha h oaiiy ha h US wi d i a do

di cio i y ow. So o h c Aica acog − o xa h SM aacig idx, ho -

cha coac ad o-a ayo − ha ao ad

xcaio.

Mawhi h i ao o xc ow gowh dig h

cod ha o ha i h ha − iy i ig

wih h a a 4- qa io a cycica coy − a

w a od GDP gowh o h x co o ya. No

a wha, oh ca ad oay oicy gi o

oaid, which wi dca h cooic xaio.

hi occ, how, i i w i i wih h a iaio

dig h coy iod oowig hoig a

.

National Income Account, National Product Account, Gross Domestic

Product, Overall, Total, Constant Prices, AR, SA, 2005 prices [c.o.p 4 quarters]

Standard & Poors, 500 Composite, Index, Average [c.o.p 4 quarters]


1980 1990 2000

Y e a r - o n - y e a r p e r c e n t a g

e c h a n g e

-10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.510.0

12.5

15.0

17.5

Y e a r - o n - y e a r

p e r c e n t a g

e

c h a n g e

-50

-40

-30

-20

-10

0

10

2030

40

50

60

F Og COm

pU FO b

US economic history shows that the stock

market and the economic cycle have usu-

ally begun recoveries with large share price

increases and rapid growth, and then − about

- quarters into the recovery − have taken

a pause or breath. Ater that, both the stock

market and the economy have usually re-

gained their energy, and this has usually been

enough or a long period o share price and

economic upturn.




h:

i wh h

fcl

ch clu

• A ocus on high-growth regions…

•…and assets with attractive valuations…

•…while waiting or double dip risks to ade

Caia a da wih a ixd caio. Th wod

cooy i o cox ha o, wih aid gowh i

gig cooi ad d o i a idia

coi. Mawhi h a o ooii ad a-

ai ha . i oi o ga i oday’

a cia oo. B i i ccia o aiai a ci

aoach ad a coicio ha aaio a aoa ad

ha o “do di” cio wi aiai.

Today’ caia a a di y woi ao a daaic

waig i gowh, ciay i h US ao i oh

a o h wod. Ahogh w a h ao h i ha

ch woi cod jid ad igh ay ad o a

do di, w do o i ha ch a caio wi od.

How, w a oio ad iy i ha h US wi

dgo a iod o y wa gowh. May oh coi

wi gow qi icy dig h x w ya, ad gig

a i Aia ad wh wi coi o di ai-

acoy gowh g. A hi i ogh o a h goa

cooy o how a oig GDP gowh a o 4-4. c.

Th oh ajo diig oc i h wod cooy i acio

aid a ig daio. Ca a aod h wod

ha daio ad agaio i h ag ad wi do whai qid o coac hi i. Thi o i o ac

i h US, who ca a (h Fd) i coaig h i

o daio y coicaig ha i wi aiai y ow

i a o a xdd iod. No ca i d o

ha h Fd wi i oay oicy o qaiai

aig.

Lqud c

Th y o iqidiy i a y i i ig ha caia

a ca cio. Liqidiy h ig ao dy-

ig cooic gowh. Noay, iqidiy igg a

o ahad o h a cooy − a oc w haod i aio ac dig h a w oh. Th

a ay idicaio ha iqidiy wi ai good i ay

gio. Th US ha how og diaio, Chia i

oay oig owad ooig i aiy a,

ad h iaio o a i Eo ad h US i ioig.

Th w Ba -ad i Eo a ig

ha ad, ad h oy y ha caioy g o

i i h US. a, w o a coioy ioig

iqidiy iaio.

Asset management in a volatile world

-2

0

2

4

6

8

10

12

2000 2002 2004 2006 2008 2010

US Money supply, change y/y ECB Money supply, change y/y

LiQUiDiy WiLL bOUC bCk

Liquidity, measured as broad money supply,

looks set to bounce back both in the US and

Europe.

Source: Boog



16

Th i, ad h aco cod o ao, a c-

cia wh w ach o oc o i .

gidig ici i caio ch a h o w a ow

xicig − chaacid y , gogahicay ia-

acd cooic gowh − i o oc o h hahy a o

h wod. W a ao ooig a oio o h caia a-

wh aaio a aaci. Dig o o woyig

i h o ha doiad a a hi ,

od a a acd o o x y dow, o

caig good i ooii o h i.

Gay aig, h oc a wa i a gai ha

dig h cod qa o , o i Jy ad agai i

Ag a gowh-a o aiaid. Thi a

ha aiy io, wih cai digc. Th

Swdih oc a i a xa o how a wih gooddaa ca o aiy ha oh.

h d

Dig h d ha ha cooic co wih

ow cycica iiiy ha good i. To o

x, w ca ay ha hi d i ow aiy a, ad

w a ig ay ig o a hi owad o cycica c-

o. B i od o achi aiay oii oac,

h i o do di cio diaa o h ada

c. Whi awaiig hi, w a ocig o h oio

o h oc a wih h oia i o gowh

ad aaio.

Wh h cooic a ay chag, a ica-

igy cycica ooio agy wi jid. To ox, w ca ha h hi ha g. Sco ch

a coodii ha cy how gaday iod

oac, coi wih a o a gowh caio.

Wh o ad o io i ha h i o a do-

di cio i cdig, hi y o co wi a

wig.

oc a, h oc wi o a w y aa.

Egig a a o, ad coai wih xo o

coi wih a high gowh ad dad a aoh.

S-d a i o oii iqidiy cia ca ao

iod. Th y aa ha h adaag ha

i w dgo a ga coy − which aa iy dig

h coig wi − h co wi o i h oc

a a a who.

h who, oc a i gig coi ha

cy od a w a − o owha ha −

goa oc a (i coaa cci).

i gig a ca jid y a gowh ad

aiy aaci aaio coad o W coi,

which i o ca a agaig. Chia ha a oco coc, h a ay idicaio ha Chi a-

hoii a aig hi cooic ighig a a

hy gai coo o a dig ad ic d. Chia

hod h o a high gowh a, ad h a

wi o w. Th coy i ao a ioa gi o

oa Aia ad ad ow y a iza ooio o h

xo o o Aia coi. Th o o h US i gaday

diiihig.

Soc a co wih xo o good gogahic d-

ad a aoh y aa. hi a ’ qay

o, h wa a diidig i w coai ha

xo o gig a ad oh aa. i ccia o

id i hi a o h a.

Investment OutlOOk - september

0

0.2

0.4

0.6

0.8

1

1.2

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

EM/DM Discount

m/Dm iO iig

The emerging market (EM) ratio, measured here as the

price-earnings (P/E) ratio or the EM sphere divided by the

P/E ratio or the Western world, has gradually risen over the

past decade and is at about 0.9 today − a sign that emerg-

ing markets are considered less risky than beore and that

capital is continuing to ow to countries with higher growth

potential.

-10

-5

0

5

10

15

20

2004 2005 2006 2007 2008 2009 2010

MSCI THE WORLD - 12 months forward sales growth

MSCI EM - 12 months forward sales growth

m Fim XpCD O gOW F

Emerging market-based companies are expected to show

sales growth o about 14 per cent during the coming 12

months, compared to about 7 per cent or their Western

counterparts. Companies in the West with EM exposure

should also benet during this period.

Th: wh h acia io chag coo

Source: Boog

Source: Boog



17

pl lqud c

good odc a aoh aaci aa.

Bi aod h wod a oay did aay ya o hi, ad coai ao ha y o iqid-

iy. Gi hi coiaio, caia dig ay a aco

woh oioig i h a .

Ba a a co ha ia hogh. oig iqid-

iy o ad o i ai ad cdi xaio.

h who, h Eoa oig d cii i ow iid o

“qaaid”. Ahogh h a i iza dg dci,

hi iac i cy ig o y xcdy og

cooic codiio i Eo. h US w o a igh

d owad high dig, ad i a oaid caio,

a aaio a o high.

Ul lw d ld

a idiaid coi oday, go od

yid a xy ow. By a idicaio, h yid c

woi ao daio ad wa cooic codiio. Good

iqidiy i caia a oay a ha yid ha

qzd o aoay ow . i h difc o

ay oi i iig i h. Aod h wod h a

oh xd ico i ooii. W ha i-

oy igd o h go od o gig a,

wh w coi o a coiaio o aaci yid

ad oia ccy a aciaio. H i i ioa

o a o’ a ccy io acco. w a oig o-wad a ha aciaio i h oa, h ay ao

o Swdih-ad io o xa ca i aaig

hi ooii. o ha h o a hi a

ccy i ha ga oia.

Cooa od o aaci oiiii. Tho wih h

y high cdi qaiy a dd, i o a-

h High Yid g i y aaciy icd. Thoaiiy o i ao ow ha i h oc a,

which a hi g iig.

Dig iod wh h wod i i a ha wh a aiy

o aco a icig h a, wih a gai d-

o ad caiy ao h , i i xa ioa

o i i a ha a a i o ow aaio

ad a. a iaio i hi, h a i

i i ad w qi ow aaio i o

ic/aig aio, od yid c. Thi h cii

wih ad qaiy o ha oh. B ha

i h a ccdd y w iod, wh oday’ high

i i ay acd y a ow i. Th oca wi oo h a o a coai o a high P/E

aio, ic i wi ha o codc i h . Viwd

i hi ci, oday’ aiy ow aaio ad h

high i i ay gadd a oig good i-

ooii.

w do o dgo a do di cio ad i h wod

cooy coi o gow y 4- c aay i

, coi wih a ow goa coy, hi a ay

y o good i ooii. o a y-

ig od o a ag ca oday, ad a a h yid o

ha o ay good coai a high ha od yid.Hioicay, hi i o a good yig ooiy. B wh

woi id ad i ai ica agai, hi ia-

io wi cocd.


Emerging Markets, CDX Index, EM

North America, CDX Index, IG

North America, CDX Index, HY, BB Rated


2006 2007 2008 2009 2010

0

100

200

300

400

500

600

700

800

900

1000

1100

B a s i s p o i n t s

0

100

200

300

400

500

600

700

800

900

1000

1100

m Db O iky y

CDS spreads or emerging market debt and

High Yield bonds − in other words, what inves-

tors must pay to protect themselves against

bankruptcy in underlying xed income securi-

ties − have allen dramatically since Septem-

ber . Although we oresee EM bonds oer-

ing return potential similar to HY bonds, the

market views EM securities as less risky.

Th: wh h acia io chag coo




•Economic growth is slowing but...

• ...share prices reect more than GDP growth

• Ample cash reserves, low debt and high

productivity will create good potential

A h o dowid Aica aco i ha

icad, woi ha gd ao a ajo − -

ciay i h US cooy. D o Aica’ adig o i h

wod cooy, a ha cooic owdow h wod o

a oicd i oh coi. Ahogh o a i

ha a do di cio i highy iy o occ ( h

h aic “Hay odd agai do di cio”), a-

iic ihd i c oh idica ow gowh digh cod ha o . A a coqc, gowh oca

ha owd o a oad o.

Di h aiy gooy aco ic, h a ay

igh o i h cya a o cooa aay. Po

oca ha gay id wad i c

oh. Coai ha a cah , o gowh

i accaig ad odciiy i high. oh h ad

cod qa o , ao c o US id co-

ai ad aay’ xcaio y a wid agi. Th

a a ai o ay id coai wh.

Dig h , how, aco aiic agy h

a o. Accodig o a c aayi o Goda

Sach, h S&P idx o US ha y a aag o

.8 c o day wh ioa Aica aco ai-

ic w ihd. oh day, h idx iad o y

a aag o . c.

i a o ooo o dig a cay a aco ad ico

ci ha do. Th a i hi had wa

wh h acia cii o o, ad w a aiy awa

o h q co o i h wod’ acia

a. Codiio a o h a oday a h, how.

By a idicaio, h i o gigaic a o h “-

i” aiy waiig o xod i h a . B why

i h ic i o di, ddig o whh w oo a

h cooic wod o a ico (“oo-”) o a aco

(“o-dow”) ci?

D c hd

oi xaaio i ha h a cai dic

i how w choo o dy daa. To aoid aoa a,

cooa aay gay choo o coa h

o o qa o h a qa a ya ai, ha i,

ya-o-ya. Thi i ao a coo hod o oig

chag i GDP gowh aod h wod. B i h US, GDP

gowh i od a a ica o dca coad o h

cdig qa, ha i, qa-o-qa.

A , h hod a adig o di . Fo

xa, i w o Aica GDP aiic ya-o-ya,h i ha gowh coid o acca a .

c dig h cod qa o . Thi i ca h

coaai iod − h cod qa o − wa a-

icay wa. B o a qa-o-qa aaid ai,

gowh ad a c i h oh qa o

ad h gaday dcad o .6 c i h cod

qa o .

Micro and macro are out o step

h:

dulc wld

National Income Account, National Product Account [ar ma 1 quarter]National Income Account, National Product Account [c.o.p 4 quarters]

Q1 Q3 Q1 Q3 Q1 Q3 Q1

2007 2008 2009 2010

-7

-5

-3

-1

1

3

5

P e r c e n t

-7

-5

-3

-1

1

3

5

DiFF mOD, DiFF UL

The US seems to be accelerating i its growth is measured

year-on-year, largely because the rst hal o 2009 was charac-

terised by a deep economic slump. But on a quarterly basis the

economy has decelerated, reecting a weaker cyclical upturn.

Source: Ecowi



19

Aoh xaaio i ha i o c, aco aiic

ay gadd a o c ha coay o. Th

a coay o o h cod qa w ihd

i a Ag. Th o h cd aciiy i coa-i ha occd ay oh ai. Mo aco ai-

ic, how, a ihd o a ohy ai − o xa

oy, iaio ad ho ic aiic. Hi o a

dcaio i h Aica cooy ga o dici

i May aco daa, o h gai aco iga o c

oh hod o ha y iacd cooa cod

qa o.

Ccu hd wh

Fho, h a ay idicaio ha h ii

gowh i cooa o ha o iaiy d o

hay high a, ha iad a coqc oaggi co dcio. Thi co dcio ha occd

aiy y a o oy cac, ay dcio, w

woig ho ad oo o caia dig. Th

c ha hay high odciiy, which i ha

gad iig o.

Looig ahad, how, i wi o oi o aiai

aid o gowh y a o co dcio ao, ic

h i a ii o how ch a coay’ oaio ca

aid. high a do o gaday coi o

ad o o cooa o, h gooi caio aid

y aco daa i aiaiig. h oh had, co-

io wi a o oo o a a y cio, o

h wad adj i coay o oca ay

jid.

l d

o c, how, coaio o cooa ad

aco aay a i coaio o a ad a. Th

o o acocooic aay i o xai ad oca

cooic aciiy a a aggga , o xa h o-

o a good ad ic i a coy. Cooa aay

− o h oh had − ac aciii a h i ,

ad ag id coai a h iay oc o dy.

Sic di daa a ig aayd, i i acay o oaa ha hi iw o h ay dig.

Rcy, o xa, ag coai ha od ig-

icay ha a i. Looig a h

ag coai i h US a ad y h S&P

idx, o o ay c dig h qa,

coad o h qa o . a US coai

a ao icdd, how, o o y “oy” a i ao

c. Th ao o h cc o ag coai

a ha, y, a aiy high cag o hi odcio

i o xod ad hy ca h ag hi a o aa

wh dad ai high, ad cody, hy o ha a

a ai i gaiig acc o dig. Sa i

ha w coac i h acia co ad ac h o-

io o acig h wih h h o cooa od

a a aai o adiioa a oa. Sic cooa

aay oc o h oio o h i co ha i

cy oig − ag coai − i i ao-a ha hi caio i igh ha ha o aco

aay.

Dcul l c

h a ya, a ah ca cocio ha od -

w h cooic hah o coi ad h oac

o hi ci oc a. Th acia iocy o

ay W coi ha had a aicay ag iac.

Th cooic owdow i h ECD coi ad h

achig o gigaic ai-o acag ha dg d ho

i ay W go ai. o ha co-

idd i iy o hi oy io coai ha oai wa cooi. Aog oh hig, h coai i

ow dad ad high ax ha coio ad i

cooi ha a o o a acia god.

od daa ici − which ogh o ay -

ad − i ha cooa aig o ha ic hodc h oac o a coy a a who. h og

, ha ic a did y cooa o ad

xcaio ao wha wi ha o h i h .

Po, i , a dd o dyig cooic -

oac i h a wh h coay oa. B -

ca o goaiaio dig h a dcad, coai ad

hi ha ha a -wa cocio o h cooy

o hi “hoad”.

Fo xa, a io achi aiy i xo o

h Swdih cooy y chaig a Swd d. Ao

c o yhig odcd i Swd i xod, ad

aog h coai wih Swdih oc a iig, a

idicaio a ha h ooio o xo i high.


-20

-15

-10

-5

0

5

10

15

20

25

D e n m a r k

S w e d e n

F i n l a n d

G e r m a n y

R u s s i a

U K

U S

F r a n c e

J a p a n

OCk mk DO b i Ly COOmi

In the past year, investors have prioritised stock markets in

countries with sound nances (such as Denmark, Sweden

and Finland), while stock markets in countries with large

debt burdens have been at a disadvantage (Japan, the

United States and the United Kingdom).

Th: A daiic wod

Source: Ecowi



20

Thi i ca id coai a igicay ag ad

o iaioa ha h aag coay i Swd. Th

a aoig ao ai o io who choo o

hi oy i h Ga, Aica o Chi oc a− ahogh h ha o xo i h coi i ow.

Chia ad Bazi a ao xa o how ha ic a

ad o o ha j h GDP gowh o a coy. Chia

i a gowh gi ha ca oa aa GDP gowh a

o ay c ic 4, whi Bazi’ aa GDP

gowh ha oy achd c dig h a iod.

Ahogh Chia h aiy wi h gowh coiio,

Bazi’ oc a ha od igicay o og-

y ha h Chi oc a dig h iod.

W w c

A h aggga , h a ay idicaio ha h US

cooy, ao h goa cooy, i ao o dca.

GDP gowh i ow owig i ay ac a h coi-

io o go i a ad coay

ioy id- ad. So a, a dad i ao howig

a ah wa d. Th ow cooic i iy o

ha a ad iac o h od oo ad o gowh

o ay coai. B haig aid hi, h a ao -

o coai ha ha good oia o cooa

aay’ high o oca.

W xc h goa cooy o gow y ay 4. c

hi ya ad ay 4 c i , which i ao h

hioica d. Viwd o a goa ci, w a h

o i a cooic owdow a a. Cod wih h ac hacoai ha a cah , ow d ad cod-

high odciiy, hi wi h ag o good cooic

codiio ahad.

Th coai wih h ga oia a ho ha ha

h wod a hi ayig d ad ca ag hi a o

aa wih high dad. Thi i iaiy a a o xo

o gig a, ao o oo ECD a

ch a h Nodic coi. How, h cooa gia

a o ao i aiig ha dad ao xi oid hi

aioa odai. May di-izd coai a ao

adiy xadig hi xo a a ha o oa a. addiio, h ooo aa igh o coai wih w-

d, cc i od, o which cycica ca-

io a o io ioac.


0

5

10

15

20

25

1994 1996 1998 2000 2002 2004 2006 2008 2010

Brazil vs China

bZiLi OCk mk v Ci

OCk mk

The Brazilian stock market has perormed

signicantly better than that o China, even

though economic growth has been ar higher

in the Chinese economy than in Brazil. In other

words, share prices need not always reect GDP growth.

Th: A daiic wod

Source: Boog



21

mc u

•The economic outlook is uncertain, and in the

OECD the key will be…

• ... how the shit rom stimulus to nal demand will go

•Decent world growth thanks to ultra-loose

monetary policy in major industrialised

countries and dynamism in the emerging

market sphere

Wod cooic oc ha co igicay o

cai ay, ic o aco aiic − ciay

i h US − ha iigy wa. Looig ahad, h

y o cooic gowh i h idiaid coi (ECD)wi h hi i hai o i aia o h

ioy cyc ad ca oicy a o a dad i

h o o caia dig ad ia coio.

ai caio i ha hi hi wi occ aiy aiacoiy

wi o good ogh o h ECD coi o

oig io a ow gowh ha dig h cod ha o

ad h ay a o .

aio wi coi o a i h ECD coi dig h

coig ya a ow ay hi, cod wih good odciiy

gowh, qz odcio co a coai. h g-

ig a (EM) h, how, iaio wi o ow. Thao a high gowh ad a ay ica. Sic ay

EM cci aa iy o acia i h a ,

xo good o h coi wi ao co o

xi i h goa a, dcig h i o daio

(gay aig ic) aod h wod.

A a wi’ aid wig, h wod’ ag cooy

− h Uid Sa − wi gow y owy dig h ai-

d o ad ay i ( h Th aic o ag

), h gai a i o.

Whi ay aco g i h US ha cad diaoid

acio, o oh iia idiaid cooi ha

d id i hi . h o zo,

gowh dd igicay i h cod qa. Thi

wig, d y Gay, wa di y xo ad o o

x y caia dig. Hohod dad ai -

cai, how, ad h wig ay ha ay d

o oii c o h ioy cyc, which − a i owoccig i h US − i iy o hi o oii o gai

a hi ya. Sha dg ighig i h Mdiaa

gio wi ao ai gowh. oca o h o zo

h icd a cooic owdow, i aa iy

o oo oocd. Eo zo GDP gowh ay aag

ao . c dig h coig ya.

Biih GDP ao cid o ha xcd dig h

cod qa. Togh ca ighig wi ha xa-

io, y o oca ah o gowh i x i i

high ha i h o zo.

Th Nodic coi a chaacid y ic ac ha

a i aiy good ha ad y ow ca go

d. Coid wih iza c acco , hi

od w o a dc cooic . Swd, gowh

wi ai y aid i h a , whi i oh Nodic

coi gowh wi occ a a o oda ac. Th

Daih cooy i i ig had y h cio

o h hoig a cah.

Much depends on shit to fnal demand


c.o.p 12 months


1980 1990 2000

Y e a r - o n - y e a r p e r c e n t a g e c h a n g

e

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

LOW OCD iFLiO D

Since the early 1980s, ination in the industrialised OECD

countries has trended downward. Today consumer prices

are rising at less than 2.5 per cent year-on-year. Thanks to

low pay increases and good productivity growth at compa-

nies, ination may all below 1 per cent in 2011.



22

Fiad h i good oia o a xo-d co-

y, o a h ha od. Th Nowgia

cooy i ig hd ac y a og ccy. h Nodiccoi a a who, h GDP gowh a wi ao .

c dig h x w qa.

Jaa − oday oy h hid-ag cooy i h wod −

o ha o o o h iaiy ad dyai ha

chaacid h 7 ad 8. Do i c

ya ha occaioay iic o h coy’

ya i h cooic wid dig h . Ui

Eo, cod qa GDP agy agad. Aog

oday’ chag a h og y, which i dia o

xo, adig dg i c ad high oy-

. h oh had, Jaa i ig hd y high

dad wh i Aia (wh o ha c o

Jaa xo d ). Jaa h aa o

h o cai cad i h wod cooic dc, wih GDP

gowh aagig -. c i x .

ulu Ch

A i h US, gowh i Chia − ow h wod’ cod ag

cooy − ha dcad. B i Chia’ ca h owdow

wa o GDP gowh o ay c i h qa

o (ya-o-ya) o a i y good o ay .

c i h cod qa. Maco daa o Jy idica

h dcaio, i ch coi a h US,

Chi ahoii ha coida oo o ia hcooy ig oh oay ad ca oicy. Th a ao

ig ha hy a aig a U o h ighig oicy

ha ga i Jaay . Chia’ gowh ay d a

aod . c dig h coig ya.

dia − Aia’ cod ag cooy − doic dad

ai og. Ahogh oay oicy ha h

ighd, GDP ha a chac o gowig a ao a 8.

c ac i h x w qa. High gowh i Chia ad

dia wi a cooi i Aia, ic Aia ia-

gioa ad i a c o oa ad − h cod

high g i h wod a W Eo (o ha

7 c).

Lai Aica cooic xaio oo o ow o-

wha i a ad ay x ya − wih GDP ica

aagig o c − a gowh g i h doia

Baziia ad Agi cooi dca o hi -

ay high ay a (7- c).

bdd x u

Ea Eo − which i aggig h goa coy −

xaio i ow oadig ad accaig a ia

coio joi h ha ha chaacid h

aacig co o o i. GDP ay ica y

aod 4. c i h coig ya. Mawhi iaio i

aig ad acocooic aac wih oh coi ad

i h ic co i ioig. h Baic coi, oh

Eoia ad Lihaia ha cy od oii GDP g-

, whi Laia ha aggd hid. Th Baic cooi a

ig aid y og xo, doic a -

ai ggih. Daio i gaday aig, acia

aiiy i ghig ad Eoia wi joi h o zo o

Jaay , .

W xc h gig a h a a who − which

acco o ay c o wod GDP (i chaig

ow aii, PPP) − o gow y ay 7 c hi ya,

6 c i ad aod 6. c i . Lagyd o hi acocooic igo ad a-oo oay

oici i ajo idiaid coi ( ag 6-7),

h goa cooy wi a o a ahad a a aa

a o ao 4-4. c i - (ic , yay

wod GDP gowh ha aagd ha . c),

hogh h wod’ i-ag cooy − h US − ha od

io a ca ho- owdow ad wi gow y owy i a

owha og ci.


China, Total, growth rateIndia, Overall, Total at factor cost, 2004-2005 prices


2005 2006 2007 2008 2009 2010

Y e a r - o n - y e a r p e r c e n t a g e c h a n g e

0

2

4

6

8

10

12

14 big Og mgig COOmi

i i

The nancial and economic crisis o /

also aected growth in China and India, but the

deceleration was mild − to annual GDP increases

o 6.- per cent. Since then the growth rate has

again accelerated. Although its astest growth

period is now past, China’s GDP may grow nearly

per cent in the coming year and India’s by

about . per cent. Smaller neighbouring econo-

mies will thus benet as well.

Maco ay



23

cl:

qu

• It will be a while beore the macro picture be

comes clear...

• ...so the best-positioned equities in terms o

growth and valuation...

• ...will now determine our investment strategy in

the stock market

Dig h , h goa oc a wa doiad

y h diic ha. Th wa i J, wh a good

a o h oh − a od a daaic ha ic

dci i a Ai ad dig May − wa oowd y a

wd ha dow, d o igig woi ao

Eoa go ac ad a d o ac co-

c ao h a o h US cooy.

Th cod ha wa i Jy ad ay Ag, wh i a-

i d o i a a ad oc a o.

Thi occd ha o dcd woi ao Eoa go-

ac ad a, xcdy oii cooic

daa o Eo, og coay aig o i ay

a o h wod ad h oc o cooic oicy i-

aio i Chia a w o aig y h Aica ca

a, h Fda R (Fd). Th hid ha ad -a day io Ag, wh a iod o ay gai aco

i i h US ga ad h i o a do di c-

io ( Th aic, ag ) od acia hadi,

caig ha ic o a o a oad o.

D l c uc

Dig h iod J -Ag , h wod oc a

(ad a h MSC Wod dx i oca cci)

ao . c. Th ’ oco w i

gig a (EM) oc a, wih Ria, dia ad

Hog Kog aog h ad. Chia, h oc a

ood wa occaioay wighd dow y aco aiichowig a dcaio i gowh. Sa Eoa oc x-

chag, aog h Fa ad Socho, codd

hi oowig xcdy good cooic

g. Aog h aggad w Jaa − wh a di-

ay og ccy ad a wa doic a coid

o wa ha ic − ad h US, wh coc ao a

do di doiad oc xchag.

Waiting or better stock market times


perf %, - World, MSCI, All Countries USD Index, Gross Total Return, perf %perf %, - World, MSCI, All Countries USD Index, Gross Total Return, perf %, ma 20


Sep

2009

Nov Jan

2010

Mar May Jul-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

P e r c e n t

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0 - .

- .

.

.

.

.

.

.

.

Sep

mgig mk LD Wy i Umm, U QUii LggD

Last spring the American stock market (right-hand chart) outperormed the World Index, among other things

because macro statistics were still good. Since then the US market has perormed considerably worse than theWorld Index, due to rising concerns about a double dip recession. Meanwhile equities in emerging markets (let-

hand chart) did ar better than the global share price index, largely due to continued high economic growth.

perf %, - World, MSCI, All Countries USD Index, Gross Total Return, perf %perf %, - World, MSCI, All Countries USD Index, Gross Total Return, perf %, ma 20


Sep

2009

Nov Jan

2010

Mar May Jul-3

-1

1

3

5

7

9

P e r c e n t

-3

-1

1

3

5

7

9

Sep



24

h who, acia a a i c oh ha

coy achd h a w ad i hi ya’ -

io i o Investment Outlook (Mach ad May ). A

ha i w oaw coid idway ic o oi a, i h cox o “ag adig”. h oc a-

, w dicd coaaiy o co ad

coai ha ay o w wiho og o

o h cooic cyc (a chaacid y qaiy ad

ow a). Sco wih ow cycica iiiy − ad h d-

i i a − ha good i. Thy icd

coicaio, ood, haacica, iochoogy

ad iii.

ga , cycica coai od wo ha

oc a idic dig h , i oh h US

ad Swd h ha o idia coai did aiy w.Thi wa iay o coai ha ha a ag o-

oio o hi a agd o h EM h. Coai

wih iza xo o Eo w ao aod y h

oc a, whi a ocig o h US doic a

w o ci o cc. Th ’ ic o

i h oc a h aa o ha cd a aco

caio ha icd a dcoig w a wa Aica

− a w a Jaa − cooy ad a og wod cooy

ohwi (h EM h, Eo).

A , oc a ad oh i a a a

chaacid y ah ow i ai ad ga caiy,

iaiy d o h dag o a wd US cio. Th

i ha oh a o h wod cooy ay icd

y a Aica do di − i oh wod, ha dcoig

igh o wo − ha ao dicd y a ay.

m l l h c l

hi cox, a ay ow aa o o -

iiic ha aco aay. B i od o a do di

cio o occ, i hoy Aica GDP dci oh

dig h hid ad oh qa o . Accodig o h

c B Chi acocooic co ooo, GDP i

iad xcd o gow y a aag o . c dig

h cod ha. SEB’ oca i ha Aica GDP wi gowy a aag o ay c.

Fo a io ci, i i aay adaago i

h a ha dicod a wo Aica a caio

ha aco aay ha do, ic hi dc h i o

ag gai ha ic o wh wa cooic

aiic a ihd. A og a woi ao a do di

cio i ad ig ha a dad wi a o

a a cooic gi a wa, o US cooic daa i

h iy o i diaoid acio i oc

a dig h x w oh.

Mawhi h i o ca idc y ha oh a o

h wod cooy − xc o Jaa − ac a idia

ad ca dcaio ha igh iay ad o a goa

do di cio.

Fho, h o ooo ai good. h US adEo (icdig Swd), oca how o ha a

c o ica dig h x oh, whi h

qia g o Chia ad Bazi i ao c.

Thi o ooo, aog wih ha ic dci dig

h a oh, ha d i ow ha aaio. i,

hi ay h godwo o high ha ic. h ECD

coi, oc a a adig a ic-aig aio o

ao - (xcd -oh o), ad aaio a

ao h a i ay EM oc a.

Th ow aaio a iad y h Swdih oc a-

, wh h yid o qii a o ha 7 c, o

aod 4. cag oi high ha o -ya go-

od. Thi 4. c i i i y high ad

wa ad o cy dig h wi 8/

acia cii.

Th ad w h yid o qii ad o cai

cooa od i ao wid ha oa. Mad i hi

way (yid o S&P ha coad o yid o BAA-ad

od), h i i i ao h ag ic h acia

cii, aog oh hig ca h c ach o -

( ag 6-7) ha d i aig cooa od

yid. a og hioica ci, how, h ai-

a ha acd ach oh coy.

Coidig h aiig caiy ao h acoco-

oic ooo, how, high i i a o fci

ao o ica h ooio o qii i o ooio

igh ow.


DJ EuroStoxx 12MTH FWD P/E

OMXS 12MTH FWD P/E

S & P 500 12MTH FWD P/E


Aug

2009

Oct Dec

2010

Feb Apr Jun Aug10

11

12

13

14

15

16

17

1819

P / E r

a t i o

10

11

12

13

14

15

16

17

1819

QUii v LOW vLUiO

Share prices have allen since last spring. Together with

good prot orecasts, this has resulted in declining price-

earnings ratios in many stock markets. In the US and Europe

(including Sweden), stock markets are trading at P/E ratios

o between 10 and 13, which shows that equities have low

valuations.

A ca: Eqii



25

Soc a a ao cy ig od y xc-

ioay iai oay oici i ch o h ECD

ad y hioicay ow go od yid i ay i-

diaid coi. h US, how, h aociaio -w h oc a ad h go od a ha

highy aic ic id-. Jy, ha ic o

cocy wih od ic (od yid ), whi Ag

wa chaacid y aig ha ic ad a coid -

i od ic (yid aig).

Th o go od yid i h o h ioa

hig. Wha iad i ioa i h ao hid h

dci i yid. Jy, yid o xcaio ha h

Fd wod a oay oicy h, which i odiaiy

wcod y h oc a. B i Ag, woi ao a

do di cio − ohig ha h h oc a− hd dow od yid.

Jy, h US xd ico yid c h ca

a ho- i a o ha og yid (h

wo-ya yid hi a w cod ow), i Ag h c

ad a og- yid h o.

cocio i ha chag i h o o h yid c

a a y ioa oc a aia, ad h a

o i h c ha h o d h oc a-

, a oo a hioy how ha h yid c

a o ha a gai o o a cio i oa.

To o x, h di d i h oc a ha

g o aoach h a ag. Th a ay ig o

icad i i o cycicay ii cooic c-

o. Rcy, o xa, hoig-ad US qii -

od o a whi ha h Aica oc a a

a who, hogh aiic o oh hoig dad ad

idia cocio ihd aod h a i w

o o dia. Th oc a wa oay ca-

ig ha h hoig co igh oo o aiy oo. Pa

o h ic i ha US idia cocio ha a oa xy ow , aig io acco oh hioy ad

aioa dogahic d ( ao ag 4).

d h whl

B ic i wi oay o i o h aco

ic co ca – h hi o i o a d-

ad i cc i h ECD, d y h US, ad gig

a gowh ai high – o ocad oc a

caio, chaacid y ag adig ad a oc o aha

coai ha hod hi ow o h oc a wh i

ai i , wi ay o aoh whi.

i oc i o gio ad cooic co wih

h oia i o gowh ad aaio, ch a

gig a ad coai i idiaid coi

wih a ag ooio o xo agd o coi wih

high gowh ad dad. Wha i haig i Chia’ co-

oy ad cooic oicy ha occaioay woid h oc

a hi ya, h a ig ha Chi cooic

oicy wi a. Thi wod h ag o wd gowh

accaio, h ig h oc a.

Sco ciaiig i i good a ao aaci.

Eciay i h ECD coi, coai hay dcd

hi caia dig dig h cooic ad acia cii

ad i ay ac caia dig i oy qia o

wa-ad-a (dciaio). Togh wih ag iqidiy i

h cooa co, hi ica h iihood o og

caia dig ahad.


Consumer Discretionary [perf %, - 500 Composite, perf %]Industrials [perf %, - 500 Compos ite, perf %]

Materials [perf %, - 500 Composite, perf %]Consumer Staples [perf %, - 500 Composite, perf %]Health Care [perf %, - 500 Composite, perf %]


Sep

2009

Nov Jan

2010

Mar May Jul-15

-10

-5

0

5

10

15

20

-15

-10

-5

0

5

10

15

20

Ly ig OF g i

i CyCLiCL QUii

In August, stock markets were dominated

by worries about an American double dip

recession. As a result, deensive sectors

(such as health care and consumer staples)

perormed better than cyclical sectors (or

example industrials and health care) on US

stock exchanges, but late in the month there

was increased interest in cyclical companies.

A ca: Eqii




cl:

Fxd c

HY benefting rom search or returns

•Yields on government securities are historically

low…

• ...so investors searching or high eective

returns...

• ...have no alternatives other than High Yield

and EM bonds

Go od yid o oh id o h Aaic ha

a hay ic a ig, achig hioicay ow .

Th a a ao − icad woi ao h co-

oy, aig iaio xcaio ad iga o aio

ca a ha hy a ad o o hi co-

oi wih xcioay ow i a o a xdd

iod. A aid i i hohod aig aio i h ECD

idiaid coi dig h a w ya − ay

chad io go cii − ha ao coid

o ow yid.

addiio, go od a i iia id-

iaid coi ha ciod a “a hao” wh

acia woi ha caad. Thi wa o aa a

ig, wh a go acia cii wih i ic i

oh Eo wa h oc o aio.

Sic ay , yid o US Tay od ha a

aiay o ha h qia yid i Gay ad

Swd, o xa. Thi ca iwd a idicaig hah oo oc o coc hi wa h i o a

US do di cio ( h Th aic o ag ),

whi woi ao go ac i ay Eoa

coi a o og i h oigh.

Go od yid i idiaid coi a idd

iy o i dig h x co o ya, y a idica-

io hi wi od.

aio wi ai y ow ad gowh wi coi-

o aiy ow. Ca a ha og oi

o hi a-oo oay oici o a og i.Looig ahad a w ya, daioay oc (a qz o

ic) wi ao doia h ECD coi ad oh

Eoa coi wi ciay ga o ow go-

od yid o a og iod, aig h o coc

h aiig iaac i hi coii ad ic

ac.

Th wi ao ajo coqc i a i

a hi hod ha h cooic coy, ic ay

coi ha y i oo o ao i ca oicy

ad hi oay oicy wao a iay xhad.

h aa a i h Fda R, h Eoa Ca

Corporate Benchmarks, BBB Rated, 5 Years, YieldGovernment Benchmarks, Bid, 5 Year, Yield, ClosePolicy Rates, Fed Funds Target Rate


2004 2006 2008 2010

0

1

2

3

4

5

6

7

8

P e r c e n t

0

1

2

3

4

5

6

7

8

ky D yiLD v FLL

A key interest rate (brown) close to zero and

possible urther easing by the Fed, greater

concern about the economy, less concern

about ination and increased appetite or

“sae” government securities resulted in a size-

able decline in US Treasury bond yields (blue)

this summer. Although yields on corporate

bonds (green) have also allen, they remainvery attractive.




A ca: Fixd ico

Ba ad h Ba o Jaa wi hi y i a

chagd i ad h gi o ai h a

y caioy. No hod i d o ha wihi a w

oh, h Fd wi a yig Tay od o a agca (qaiai aig). Th Ba o Egad, how,

ay i i a wao owha ai − a i

− ic Biih gowh ad iaio a oh dicd o

high ha i h US, h o zo ad Jaa.

D cd cl

Th digc i codiio odig ajo ECD c-

a a ad h ca a o coodiy-odcig

coi i Caada, Aaia ad Nw Zaad a w

a Nog Ba i Noway ad h Ria i Swd a

coig ca. Whi h ajo ca a ha

ao o hod o o a y og i o giig hiy a hi, og cooic codiio, cai iaio

i ad i ac owha ohad a a a

gi h oh ca a ao o gaday ach

hi y a dig h x co o ya.

h gig a (EM) h, oo, ay ca a

a cood wih high cooic gowh ad oig i

o ohaig, o xa i dia ad Bazi, wh coi-

d a hi a i h cad. Chia, how, h co-

oy ha g o ow dow, hogh o y high ga,

ad iaio xcdig ood i aay aig o

a. Thi a ha h d o h oay igh-

ig i Chia ha diiihd, ad iad h ahoii wi

oay oo a h coy’ cooic oicy a i.

h yld c

Go od yid i h EM h a i aia-

y high ha i h ECD coi. Thi a ha ci

yid a a o aaci. EM go od yid ay

idd i owha a a o y i a hi,

aiy aid ic ica ad oh aco, -

ig od ic i a h gadd a aiy a.

Tha o h oc o og EM cci, gig

a d a a a ca h aa aaci o i-

o wih ch cci a h o o Swdih oa a hia ccy.

Cooa od − aig High Yid − ao ai aac-

i. Th dow ha doiad i a dig h

cod qa o ao acd cooa od − yid

ad agai go cii o ad od ic

aowd − h dci i a wa a ha o qi-

i. Jy, wh i ai d o acia a,

cooa od agai od ogy, ad Ag wa

aoh good oh.

Poc ao ai igh, a a dig h aid o

ad h ha o . Cooa od wi

o h wod cooic , ad i caiy ao

h gowh ooo ica − iad y h caioao a US do di − cooa od a i a a

iaio ha qii.

dl ll uc ll

Th cag o coai ha go a i aig a-

idy o oh id o h Aaic. Accodig o SEB’ oca,

h ha o Eoa i o High Yid od goig a-

(-oh g) wi a o h c 6 c

o . c hi coig wi, whi coodig US

g a 6 ad c, ciy. Th oa o

coai who od a caid a High Yid i ao

i Eo ad o ha , i h US.

Dig h coig ya, o xcd o High Yid

od i coiday ao ha o Gad od.

Eci yid i a high ad h oo o aow yid

ad agai go cii − ad h o ic

gai − i ag, ciay a a ig’ widig o yid

ad.

Th wid yid ad i h High Yid g ao oid

a o o “chio” i h ha US ad Eoa go-

od yid (h cha o yid ad) hod

xcdy gi o i aidy, whi h yid o h

high-ad Gad od − which oday a a-

giay ao h qia go od yid − wod

ocd wad, wih ic dci a a coqc.

Dvg: ig yiLD

Dig h a ya, h aag aa o US High Yid od ha 9. c ad o qii (S&P ) . c,whi h coodig oaiiy ig w. ad . c.

Ao woh oig i ha a ooio o US HighYid od i h B ad BB g had a hi-oica coaio o ha c wihqii. Sch od a h a good aaio qii, ciay wh h cooic o-oo i o cai ha a.




cl:

d ud

•The rules o the game are changing…

•…in a volatile market…

•…but good portolio characteristics can be

ound

hi ya’ Investment Outlook (Mach), w wo ha

“Looig ahad, i wi aiay o ioa o i-

o o a adaag o qaiai d ha hooghy

hdg hi dowid…”. Mo o coid o a coy

a h acia cii − a aiy i a o a

hdg d aag ci. W xcd o

o difc, giig gi qaiy hdg d a o-

oiy o o hi i ad a.

Th acia a ya ga w ad h dw a

cii iod i a Jaay ad ay Fay. Thi wa o-

owd y a y good iod, h a go ac cii

i which Eo wa h ai oc o aio. Woi

ao ohaig i Chia, h oi a dia i h G o

Mxico ad h i o do di cio w oh

ha ad h i cia o difc. Hdg d

w aay acd y hi odig, i a oh a-

ca, ad hi ya ha chagig o da. Th

ha ajo digc i a oac w

di agi ad ao w di hdg d.

So a hi ya, hdg d a a go ha gay -

od i way ha ha d a o ho

who ha id i h a ca. Thi i o ha

oc a, o xa ca oa. A h d o Ag,

goa oc a ad a h MSC AC Wod idx

i oca cci wa dow ao c o h gi-

ig o . Looig a h cod qa, h a idx i

oca cci wa dow ao c, whi h HFRX

Goa Hdg dx o .8 c.

b djud u

ooio , o hdg d ha oidd good o-

cio i a difc a cia. Thi a ca i hig

io h odd i o oa i ad i oid-

ig a i-adjd . A a wh i co o

hdg d, h i a wid digc i w

hdg d, ad i i ccia o i i h “igh” hdg

d. coaoaio wih Ky A Maag h

a o idiy good hdg d wih od chaac-

iic o i ad o id ooio wih h chaaciic

w a ooig o. Th cha ow how h oac o

hdg d coad o h VX oaiiy idx.

Hedge unds withstood turbulence

World, HFR, Global Hedge Fund Index United States, CBOE, Volatility Index (VIX)


Jan2010

Feb Mar Apr May Jun Jul Aug

I n d e x

1140

1145

1150

1155

1160

1165

1170

1175

1180

1185

1190

P e r c e n t

10

15

20

25

30

35

40

45

50

55

60

mJO FLUCUiO DU O LOW

ik ppi

Most hedge unds have had a difcult time

coping with volatile markets this year, with ma-

jor uctuations in returns as a consequence.

The chart shows how hedge und returns

occasionally ollowed (un)willingness to take

risks, as measured by the VIX index (inverted inthe chart).



29

Coidig h a w xc i h a − a

od coy − w wi oc o o hdg d

ha a “giy” diid. Ao ad diig

oc oh ha oc a a chaaciic w oo oaog aag. Thi wi a ha w wi oc o o

Goa Maco, CTA, E Di, Cdi L/S ad Miagy

d. W a dcig o oc o Eqiy L/S, ic w -

i w ca ow achi a oc a aocaio cha

ad ia “odiay” qiy d, w ca o

Eqiy L/S d wih o a ch a adig.

Th a ha a o a hi ya. Thi ha cad

difci o hdg d, who aag gay i

d ad dicaiiy. Th a a w ico

(coay o) ad aco (wa cooic aiic) ha

a h dig h ya, wih hdg d i cc-y aoig hogh h o i a aiacoy

way. Th a aay diaoi h ad h,

o h who o cho i ha od w.

h l h w c

A h agy , w xc Goa Maco ad CTA

(Coodiy Tadig Adio) o cio icy. Thy ha

h oia o co wih ho- oaiiy ad woi,

whi ig o d. Looig ahad, w i ha a

od coy wi coi hod ao h agi.

Aoh coqc o h ac wod cooic i-

o wi g ad acqiiio. Mo ad o

ch aacio w coai wi occ. E oday

w M & A da ig aocd h ad h, icd-

ig o aiy ag aacio. hi y o cia,

E Di hdg d agi wi di good aig.

Ahogh h wod cooy i coig, i wi do o aa ac. So coi i ac ajo chag,

ad i h ho hi iaio ay co a i

ogh. Bca o h ac o coy, coai

wi co dig codiio. So coai a ha-

ig a ighy ogh i, whi oh coai a doig

y w − a good dig god o Did ad Cdi

L/S aacio. W i ha ooii i h wa

o cii wi ai y good i a o h i i-

. Coc aayi y hdg d i ioa i hy a

o coi o good i aio o h i hy a.

Fo h agi, ch aayi i xa ioa ca

hdg d iqidiy i o oo. Thi a i a ogo o hodig i w a a o achi h did -

o.

o coiio, hdg d a i a o oa

aiy did ic h coiio o a i i

ow. Nw giaio (icdig h Voc ) wi ac

hdg d − ciay hi owhi − i i

, hi d o a diadaag. Sa ( i

hy ay coidd a i oig) a xacy wha w a

ooig o, ad hi i ao wha w hi hdg d wi d-

i i h . Hdg d a h a a ca ha w

a o ha ad o icd i o Mod

oga.


A ca: Hdg d

neW rULes oF tHe GaMe For HeDGe FUnDs

Nw US giaio o who ay ow hdg d ay oiay io-a o hi a ca. Th giaio ha dad dig . Thqio i whh i wi a y ch. Accodig o doc -id o Aica ahoii, Goda Sach ad Moga Say aoha ay USD iio id i hdg d, ia qiy, cdiad a a. od o coy wih h w Voc , which c-iy ha a axi o c o a a’ Ti caia ay idi hdg d c., hi wod a ha Goda Sach ad MogaSay dc hi xo y o ha c dig hcoig dcad. Th aai wod o ica hi Ti caia.

Thi hod o a dia i a hdg d a, wh a oa o oha USD iio i id. Th a hod a o waow hxcd a od o a. Thi wi chag h a,

h wi oii a w. Fo xa, hdg d owhic wi co o aa, which igh i io.




cl:

l

•Bad US statistics but…

•…their reliability is still unclear

• Asian initiatives to cool the market are working

Th wod cooic coy ha iod h iaio

o a a. Mawhi cy ihd US a a

aiic w ay caaohic − h wo g i

ya. Ag 4, aiic o xiig US ho a i

Jy w ad ad w igicay wo ha xcd,

caig wod oc a iy. Ag , aiic o

Jy w ho a w ihd ad w ao aya.

Th a g a woio, i o iw hy w

iad i ac agy a xcd c. Th da axcdi joyd y -i ho y i Aica dig

h ig cad a a a a o oid ad cad

ay yig dciio o accad o h hid o h

cod qa o . i h coy aa ha h

aiic d wo oc h ax cdi ha xid.

Bo w ca daw ay a cocio ao how

Aica a daig wih h hoig iaio a h d

o h ax cdi, w wi oay ha o wai i h d o

S o ay i ay x ya o ca d i

h US a a a.

Dig h aiig ha o woyig ao h wod co-

oy, Aica co a aay hia. Thi woi

wi ha o id ad co wi ha o co o

cooa wih hi iaio o w ca co o ay

ajo wig i ho a. Th ao a i ioa

o co codc ad wi h a y aco i h

hoig a, which i i ioa o h ao a-

. To a co ag o y agai, ohig wi

ha o igg a a . W a ao a

aiic a h o ioa aco. h ao a

io, o a a aii, w xc co o gai

hi wiig o y. Thi wi oay o a aid co-

y, a ca d o h . Thi d cod accadig i h wod cooic iaio igicay

, hi i o o ai caio.

Chia, h cooy i owig dow ad ii who

wad ao a a a dig h ha o

a aig o a i. Th a i cii wih high i-dia ad cocia a a ic , h

a y Chi ahoii ha awhi wod w, o

a dcaig cooy i good o a a a i hi

iaio. Th aai wod a wad ic cah.

ciday, a cooic dcaio i Chia oy a

ha gowh wi a y a w cag oi o aod

c iad o do digi.

Aid o h y ag cii, h a ay cii ad

gio i Chia ha ha ch a codiio ad

a a ic a o aoa . Thi oaio

ao ha a hohod acia iaio ha i o i ha

wih ic (ad hy wi iy ha o oy o).

Looig a Chia cicay, w o ha o ag i-o, icdig ia qiy coai, cho o y o-

i dig h . W ao gad hi a a ig ha h

Better and worse

DATE ACTIONS TAKEN TO COOL CHINESEGROWTH

Ju 18,

2010

Ca a ai caia -

qi o d − h o h

hi.

mch 18, 2010 Sa-owd ha a o a

a coai a odd o

wihdaw o h a a a.

l 11, 2010 Ba ay o d o cao.

l 15, 2010 Th cah dow ay o cod-

ho y i icad o 4 o

c.

l 30, 2010 Bijig, aii a ohiid o

yig o ha o w ho.

The table shows the actions that Chinese authorities have

taken to help cool o the market. One result has been a

alling rate o increase in home prices, exactly what was

wanted.



31

a ha co o aoa ad ha h

dci ha ha xid a agy d coo.

v cd u

Sic h acia cii agd a i wo dig 8, a o

ha had. Saig wih zo aaiaiiy o cdi, h

iaio oday i a . A ag ajoiy o h a a

io w co ha h i o ajo difcy g-

ig oa i h aig y, a ad oh cdi

iiio ha aiaid a o caio aid owad

h iz o h oa-o-a aio. i o oi o oow

a ch oday a ioy. Loa oaig a i ao ha

h cha ic y oaia, how, ad hi i

ay ha o oa a a. 8, a a io

w dig i had o o o hi oa. Today h

iaio i coy di.

Th caio codiio h aiig ha acd

y a id o oacy ha i gay oi o h a

a a. A , oowig co a ao ow ad

ic ha aiid. o ao ha o codc i

h a, a idcd y high aacio o.

Y i i i o iy ca wha hi w oacy i. Wha

wi cdi ooii i wh w ha h cii

coy hid? W i hi i h co o h c-

aiy i od i h a a a.

i ha w i xi i h a i ha i a-

i aog io i coig daaicay wo. Thi

aco gw i gh dig h cod ha o Ag ad

oday o a gi dag. B o ai caio o od-

goa cooic coy i a ag i ao o a

a i.

Th w ha o a ha io-d (

Investment Outlook , May ). Th x ag igh

ha h wod cooy aii ad ha a dad

ay oo oaiiy aog a a coai. h

cooy io, w aicia ha i ca hi

o o ad ha ia coio wi ica. Thi

wod igicay io a a, ad h a wod

oig agai.

wh lw cd u

Rc a a a aiic, ogh wih oh wod

cooic daa, ha d o a owha o o co-

y caio. coqc o hi i ha o h agi,

w a owig o ocad o h a a a

ca. A , hi wi ha o aca coqc o

a i adoi. ad, w i i ha i wi

i a o ow a a i h , hogh wihagiay ow ha w had xcd j o o

qa ago.

Fo acia io who ha o y ogh io h a

a a, i ay ia o a idig a aoca-

io. codaio i o gi wih caio, oad a

a d ad a o add o ich-oid, high-i

i. Cai a a i ha cay ighy

high i ay ia i oday, oidd

ha o i a o idiy qaiy aag wih a high

o a ad a a aag i.

A ca: Ra a


0

1

2

3

4

5

6

7

2005 2006 2007 2008 2009 2010

F i n a n c i n g c o s t , %

US Interest rate swaps, ask, 5 year Bank margin (assume 0.5%)

FiCig CO v LgLy

LvD i FW y

Transaction volume has risen since the crisis

raged, but is showing a brie pause at the

moment. Low nancing costs together with

economic recovery mean good potential or

real estate, i this scenario proves correct.

Source: Boog




cl:

p qu

• A unctioning nancing market and strong

reports are good or private equity

•But nancial worries are hurting the PE market

•Good macro growth and big discounts to NAV

make PE investments attractive

Th daa dyig h ia qiy (PE) idy

ha iod i ay way. Fo xa, h cooy i

aiiig, cooa o a icaig ad h acig

iaio ha iod.

Dig aio o o woyig i cooi ad i a-

cia a hi , how, w ha idc

ha h iaio i i agi, which ioy h h PE

a. Taacio aciiy ha o o, ad a

iiia ic o (P) had o cacd o ood.

Mawhi ha ic o id PE coai ha a.

Ahogh h ic i gaday ioig, h a a

oc o coc o PE coai. Th o ca, o

co, i how h cooy i oig. Th a- o wo-

i ao a US do di cio ac h PE idy i

a way. Fiy, a wa cooy wod i i a

ha i owd y PE coai wi o o

way, which ay co ciica i hy a highy -agd. Scody, cooic woi gay a wa i

ai, which dicy iac h ha ic o id PE

coai ad h aiiy o h coai o cay o

good aacio.

addiio o h cooic do, h i o

chag i o h ada o h PE co. Vaio iiiai

a dway, aog h h Voc , aig ha

Aica a wi o aowd o ow PE i o

a ag ca. Wh hi o i id, i wi ica

h hodig aaia i h coday a y h qia-

o ay c o xiig PE hodig i h US.

Thi h US Ho o Rai ao aod

a “cay ax” − a ax ica o ga a − which h

Sa ha o y aod. Ga a a coai

ha do o i dicy i PE iad g a i h

o o a oio o h ha PE coai gawh hy ooio coai a a o. Th id co-

ay Baco i o xa. Sic hy a dd o

ch di o ga , i i ciay had o

ch coai wh h aacio a gid o a ha,

a i ha do a i dig h .

i h o iig ha h ha ic o id PE co-

ai, i h oc a, hi a ig ad

wh h Eoa oig d cii ciad (o a

a h a’ oc o h cii). Dig h a ,

wh a w ig ao h US cooy, ha

ic o PE coai hd aiy w.

uc w lc

Aid o h cooic ad gaoy iaio, h ac-

ig iaio ha ioy igd o a a caiy

aco o h PE idy. Ahogh i i oo ay o dca a

d o ch o, h ic ha h iod

a ha xcd. Ba a oc agai dig oy o

h PE co, ad h cooa od a i agai o

o PE coai. Aoh iga ha PE i ow a h wo

oac i ha a o w d ha cad

hi ya, a a coy “dad” . Baco, -

iod ao, cy ad a d ha ha aid USD

iio − adidy oy ha o wha i dco d

ogh i a w ya ago, i a coaio ha o-

c a ioig ad h i gowig wiig o i.

Th a oh ig o gh a w. Ahogh h US

cooy i a ca o coc, oh a o h wod a

howig dc o good a o cooic gowh. Eo,

h cooy howd id i hi , ad h

PE idy’ ooio coai gay did og

cod qa aig. Th acqiiio ad g a

ha ao g o i agai (xc o i o c-

aiy). Vaio aacio oo ac dig h ig ad

. Lag PE ch a i ad KKR caid o di-, wih a ic dd -4 c ao h

od a a (NAV) o h coai od.

A winner as the economy stabilises



33

Th a i ciay coagig, aig i id ha id

PE a i add wih a -4 c dico o NAV

(h hioica aag i aod c). Th a

a a o coaiy cacad, wih ay coa-i giig hi i a “iiqidiy dico”.

Th ag dico a ao a oc o ooii.

Aoo Aai A (AAA), a id coay, wa add

ai hi ya a a dico o w ao c o i

NAV. Th coay caid o a ha cha, ig i

a high ha ic. Vaio oh a ay a ow a-

ig iiiai o a adaag o h ig dico − a i-

ooiy o ho wih oy o i. Thi hod

h ica aaio a h dico hi.

h dcu

Aig ha h wod cooy coi o gow d-cy, h a o ooio coai hod gow h a

, which a iig a a. Aig ha

o aacio ca caid o a aaio iia o

h ao xa − -4 c o NAV − h a

hod aoay wiig o hi h dico igi-

cay, oc acia caiy a.

ioa aco i PE a oac i ow – ac-

c o ia caia ad a y o i. A

iod ai, h iaio o h Voc wi

i a ag qaiy o PE i i h coday

a ig od o y Aica a. od o o di-

h a xciy, how, h a wi oay

ha a ghy iod o di hi PE hodig. A h a

i, h wi a dyig i d, d i

a y wy aihd d ad ho ha w cad

i c ya. Th d ha o a oy caid o a ac-

io o h i hy idd o a. a o

ca, h i iod cid y h d a daw-

ig o a co, which wi ca yig .

D o h a c o c ya, ic o PEooio coai ha a aiay. S a ao

ow giig o acc h w ic . Togh wih

h ag y ad high dico, hi ca good i-

ooii, ha aiy aog “codai” −

cha o xiig PE i o oigaio.

Tho who ha a og- ci ad caia o i

i PE h ha good ooii, oay ha o

a y og i. A w dcid ai, h iod a a

cio i o h i o PE i − h

a ooii h o a id PE io o ga

ag a. hi cox, how, i i woh oiig o

h ioac o iig wih h igh PE a ay. dy* how ha whi wod oc a oidd a

og- o aod c, h aag PE

ha gad iia o ighy high , - c,

h o cc o qa ha gad aa

i h - c ag o i.

Dc cooic gowh adig o iig NAV ad ia-

oy hiig dico o NAV, cod wih coid

ow i a, hod ad o y good PE i

oac i h . B i a ho- ci,

woi ao h cooy, gaoy a ad coid

aacio a caiy ay hod ac h a.W a ad o ica h ooio o ia qiy

i i o ooio a oo a h a iaio

co ca.

* Source: EVCA: V Ecooic ad Bacoc Coig


A ca: Pia qiy

LPX50 TR Index, 2003-01-01 = 100

MSCI World Gross Index, 2003-01-01 = 100


2003 2004 2005 2006 2007 2008 2009 2010

50

75

100

125

150

175

200225

250

275

I n d e x

50

75

100

125

150

175

200225

250

275

big DCLi – Og COvy

Ater doubling during the rebound,

share prices o listed PE rms have run into

headwinds. Financial market worries have hurt

share prices, but undamentals are steadily

improving.




•Moderate price increases due to decent world

economic conditions

•Low interest rates and an uncertain economic

outlook avour gold

•Oil prices will remain in the USD - per

barrel interval

Coodiy ic ag oow goa cooic o-

ac. Li o oh i a, i c ya h ic

d o coodii ha d a o-coa id.

A a ha id a h i o h cdi cii, coodiy

ic odd ay i (owha o h oc

a). Sic a ig, how, a coio i o

o cod ad qio ao h gh o h goa

coy ha cad coodiy ic o o.

caio o goa gowh xcdig c dig h

x co o ya oi owad iig coodiy ic

ahad. Today’ xy ow i a ad high iqidiy

i h aig y ao iga iig coodiy ic.

a ho- ci, how, i oo a i h goa

cooic wi ow a i. Th coodiy ic ica

wi h od. Pic a iy o ai oai a og

a w a i a agi iaio, wih ga caiy ao

h cooic d. A , coodiy ic a ig

di iaiy y h i ai o a ay ah

ha y chag i h daa dyig hi a

ca.

mll l c c oh, h hioicay og aociaio w

h doa ad oi ic ha ood. Whi h doa ha

cad igicay, oi ic ha aid aiy ca i

h USD 7-8/a ag. Th i ag caaciy

o oi odcio − ciay i Sadi Aaia − which gi

h gaiaio o Po Exoig Coi (PEC)

h c o coo ic y cooig y.

Fo xa, Sadi Aaia ca oo odcio ad h

dow oi ic i goa cooic gowh o o

owig dow oo aidy. a ad aq ao ha ajo

oia o ica h oi y, i h aiig

cai oiica iaio hy a hady iy o a ay

ig chag i odcio.

Fo PEC’ ci, oi ic a wco o o

a high a oi o hy ha GDP gowh i h

gig a h o i h ECD coi (a oi

ic ciig). B oi ic hod o a o wh

dad xcd odcio (a oi ic oo). ch a

iaio h i o caaciy ad PEC hy o

i aiiy o coo ic.

Economic recovery liting commodities

cl:

Cd

Agri-c Industrial metals EnergySource: HWWI

2000 2002 2004 2006 2008 2010

50

100

150

200

250

300

350

400

450

500

50

100

150

200

250

300

350

400

450

500

ommodities

COmmODiy piC FLC

COOmiC iUiO

Commodity prices have ollowed the pattern o

the global recovery. We oresee decent global

GDP growth during both and , which

is likely to increase the demand or commodi-

ties.




A ca: Coodii

c a i ha PEC wi y o oi ic

i h USD 7-/a ia. So a hi ya, h aag

ic ha i ac USD 8/a. Coidig i

caaciy, PEC oo iy o a o ic wihi

i did ia dig h o . Thi a haaod USD 7 i a good yig iaio ad USD i a

good ig iaio.

B h a xa aco ha ay ca oi ic o

a o o hi ia. Righ ow w a i h idd

o h Aaic hica ao, which a o J o

No. Accodig o oca, hi ya’ hica

ao i xcd o ii, o h i a iza i

o ajo diio i ga ad oi odcio i h G o

Mxico o h x w oh. Ahogh US oi oci

a a cod , oi ic wi oay ci i ioa

odcio aa a acd. Th aaoy o h co-

y i aoh aco ha ay ha a iac. h goa

cooy i ac io a cio o ci d o a

dad, hi i iy o cd i oi ic.

Dd dul l Li oi ic, idia a ic a ii o chag

i cooic gowh oca. Th ic adiy wh

h oh Eoa acia cii o o. Dig h

, ic aid ow d o woi ao h Ai-

ca cooy ad wh Chia’ o o ow cooic

gowh ga o ha a iac. Today, how, dad o

idia a i icaig i o ECD coi, a i-

dcd y aig oci. B h ca ooo i

iy o ic a oday’ a a dig h hid

qa. La i , how, h a oc o ic

ica a h cooic coy gai gh.

God wa h ig wi aid caig i ai i h

ha o . Wh a w a hi oi, godad Aica go cii w iay h oy

a ha io wad o y.

Th god ic ica dig h a ix oh wa ao

c. od o god ic o coi ciig a

h a ac, how, a o cod (h Eo-

a d cii, h US do di o ighig a

i Chia) wod ha o gow i gh, o a w dagwod ha o aa. A od ic ica i h-

i h cad, ic i a a ow, dad o

jwy aog co i h gig a h

i high ad ca a wod i o xad h ha o

god i hi oig xchag . addiio, acia

woi a iy o i o a whi, which i h aco ha

ha di god ic o oday’ high .

culul c lll A ha wa ad dogh i h ajo wha-odcig

coi o Ria ad Uai d o a 7-8 c i

i wha ic dig Jy ad Ag. To doic

i ad ic ica a h co ,Ria ad coid xo o wha dig h o

. Th iodcio o ad icio i o coy

ha a dcy o ad o oh coi, which i ha

ca wod ad o hay iig agi-coodiy ic.

A iia caio occd a w ya ago, oowig oo

ha. Th wa agi-coodiy ic ica ha

acd ood ic wodwid. Th dic, how, i

ha oci w ow a ha i, wha oday h i

a gai a wo ya o good ha. Accodig o

a o ihd y h US Da o Agic o

Ag , h a ag oci − ciay i h US −ha o ha o h ya’ ag Ria ad Uai-

ia ha. A ic hoc i h iy hi i aod,

gai ic wi oay ai a oday’ ca

a high i i o x wah i jid. Th

aa hoo ow a “E Niño” ha acd

y “La Niña”, icaig h iihood o x wah

ad hica dig h wi o -.


2006 2008 2010

200

400

600

800

1000

1200

U S c / B u s h e l

200

400

600

800

1000

1200

W piC LLy i Ov

Extreme drought has led to sharply rising wheat prices, but

since there are ample stockpiles a price shock can probably

be avoided.


20 05 200 6 2007 20 08 200 9 2 01 0

1.10

1.20

1.30

1.40

1.50

1.60

1.70

U S D / b a

r r e l

30

50

70

90

110

130

150Oil, Brent

EUR/USD

Wk Lik bW OiL piC D UD

Since oil is traded in US dollars, there has been a strong

association between the dollar and oil prices. When the

dollar declines, producers demand higher payment or their

commodities in dollar terms, resulting in rising commodity

prices, and vice versa. This association has not been appar-

ent during the past six months.




cl:

Cuc

•Risk appetite has driven currency rate trends…

•…but interest rate dierentials may take over as a driving orce

•Emerging market currencies are ready to soar

So h oh ago, o a wa ha coi

who go ac w i aiy good ha

wod hi cci acia. Looig ac, oday

w ca o ha coc ao Eoa oig d

cad h o o g ad h US doa o i – a h

oo, a o wa woh USD .. R o h

o Eoa a howd ha woi ao h aig

co w xaggad, ad ic id-Jy h a ocha hid o h US dg dci ad owig cooic

gowh; h o gaid god, whi h y ghd

ad achd a -ya high agai h USD a i Ag.

Coi wih og go ac ha d

hi ccy aciaio ah ic id-J.

Th oig xchag a i di aiy y h aco:

i ai, i a diia ad h daa

gh o coi. i, h h oc ay i

hi iac o hoad og- ccy d. Dig

h ha o , h gh o coi doiad o-

ig xchag a, ad od go ac wwadd (wih ow dowwad o h o a a

coqc), a i J g i ai ca

h ai diig oc. Tha d wa d a i Jy

wh woi ao a Aica do di cio cad

a cci i h y ad h US doa o gh.

i dl wll h

ai caio i ha woi ao a do di cio

i h US ad goay i xaggad ad ha a wi

ay oai ( ag ). A coc ao h US

ad goa cooy ad ad i ai co, i

a diia wi agai doia h ccy a d.

Th “cay ad”, i which io oow i ow-i

a cci ad i i high-i a coi, i

cocd o i ai ad d o coo di-

d. High-i a coi a od aiy i h

gig a (EM) h, whi h o zo, Jaaad h US a aog h ow-i a aa. A a co-

qc, xd ico ad oig xchag ad wi

dadig EM cci, caig h o acia.

Mawhi coi wih og go ac ad

good cooic gowh wi coid iow o oig

cci, oh ia h oc a ad ia dic i-

y coai. hi c, oo, h EM coi a

oiiod. Th Soh Koa wo, Sigao doa ad

doia iah hod aog Aia wi, whi h

Swdih oa ad h Nowgia o a w a h Poih

zoy ha h oia i h W.

Coi who cooic gowh i aiy d o xo,

ch a Soh Koa, a h hay ao ig

hi cci acia. Th coi h ha ic-

i o y o “a dow” hi cci hogh oiica ac-

io o oy qaiai aig a o ic h

xchag a i hi ao.

Shit in driving orce ahead

United States, CBOE, Volatility Index (VXO), USD Euro Zone, Spot Rates, EUR/USD


Jan

2008

Apr Ju l Oct Jan

2009

Ap r Jul Oct Jan

2010

Apr Jul

10

20

3040

50

60

70

80

90

1001.15

1.20

1.25

1.30

1.35

1.40

1.451.50

1.55

1.60

LOW ik ppi biD UD g

Risk appetite, measured here as the VIX index, has largely

determined the perormance o the US dollar (measured

against the EUR). As risk appetite returns, the dollar is likely

to weaken against smaller emerging market currencies.



37

W ?A coc ao h US ad Eo ha caad, h

Jaa y ha d o ad o i a a ccy.

La i Ag, h xchag a ow 84 y US do-

a, h high a i ya. Vaio aco ow idica

ha h y wi wa i h .

Jaa − who cooy i ogy dd o xo −

wod i a wa ccy. a occaio h go-

ha xd i i i a dciaio o h y,

ad hi ha cad h a o dic iio o

oh qaiai a.

addiio, Jaa − wih i oo go d ad

oiica aayi – wi coi i zo i a gi

o a og i. Thi wi a i o o h o aaci

coi i which o oow oy wh i ai ad

h cay ad .

A og a h a i woid ao h hah o h

Aica cooy, h y wi ai og. Jaa wi y

o co y aciaio hogh oiica acio ad/oqaiai aig y h ca a. A h a gi

o ai ha h US i oy acig a owdow, o a do

di cio, h y i iy o wa − hogh owy.

Ch l cuc ul

A w dicd, i id-J Chia ga a aciaio o

h ii (o ya, CNY) agai h US doa. Th i

ha Chia wi add a “ccy aiao” y h US

ha diiihd. B o a, h CNY ha oy cid ao

c agai h doa. Thi ccy o hod

gadd o a a yoic g, o a a io a

o dc goa iaac. Th a ao o ha Chiaha g o cha Aia go cii, -

ciay Jaa ad Koa od. Thi idica a oicy o

diicaio owad h a ad away o h US doa.

Th qio i whh h US, which i ig i cooy

dca aidy igh ow, wi y y oiica a o oc

a h aciaio o h CNY i h a .

u ud u

Th o zo cooi coi o d w wo

oc: zo o ow gowh accoaid y daio i h

PGS coi (Poga, ad, ay, Gc ad Sai)

ad high xo-d gowh i Gay. Th wo oc a

ig o h Eoa Ca Ba (ECB) o

wo dicio. Bca o h ow ECB y i a ad

h cha o, h Ga cooic achi i iig

a ad iig high iaio. Mawhi a high y

a ad a og o wod i hig dow h PGS

cooi h, wih o ad oiica iaiiy

a a coqc. od o o i wd woi ao

h aiaiiy o h o, h oa a o h

ECB i ha i i a chagd o a og i,

wih oi xaio o qaiai aig ahad i od

o o oh Eoa coi. Th o wi ai

cha i Ga , ad Gay’ cooy wi coi

o ahad, wih Ga xo a h ai wi.

Today a h cooic ow − h US, h o zo

ad Jaa − wod i hi cci o a ow i

od o ia xo. o o h a ha

dicy o idicy ac hi ccy, ch a qaiai

aig, hi wod di h ccy a aac w

h. S a y Jaa, o xa, a h iy o

oowd y iia i oh h US ad h o zo.

A io o i ai a hi ya wi gay a-

o og EM cci. How, h a ag goa

iaac ad io a jiy. W ca h xc a

oai oig xchag a o aoh whi.


A ca: Cci

Exports, Total, SA, JPY [ar 1 quarter] Spot Rates, USD/JPY, Close


1996 1998 2000 2002 2004 2006 2008 2010

P e r c e n t

-100

-75

-50

-25

0

25

50

75

100

125

U S D / J P Y

70

80

90

100

110

120

130

140

150

160

Og y Uig XpO

The Japanese yen appreciated signicantly during the

nancial crisis, rom about 120 yen to less than 85 yen per USD, and is close to a historical high. A strong yen hurts

Japan’s export sector, creating incentives or politicians and/

or the central bank to take steps to weaken the currency.


2000 2002 2004 2006 2008 2010

6.75

7.00

7.25

7.50

7.75

8.00

8.25

8.50

U S D / C N Y

6.75

7.00

7.25

7.50

7.75

8.00

8.25

8.50

DLy y FFC

The renminbin (yuan) was revalued against the US dollar

in mid-June but has only risen by around 1 per cent. This

should be regarded as more o a political goodwill gesture

than as a serious attempt to reduce global imbalances.





-80

-60

-40

-20

0

20

40

60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Equities Fixed income Hedge funds Real estate

Private equity Commodities Currencies

p e

r F O r ma n C e O F D i F F

e r e n t

a s

s e t C L a s s e s s i n C e 2

0 0 0

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