Newton* Believes Outlook for 2010 Unlikely to be Driven by a Traditional Consumer-Led Recovery
November 12 2009 - 8:25AM
PR Newswire (US)
Defensive sectors and developing economies set to be key investment
focuses LONDON and NEW YORK, Nov. 12 /PRNewswire-FirstCall/ -- In a
recent panel debate on the outlook for global markets in 2010, a
team of Newton's global fund managers agreed that a 'traditional'
consumer driven cyclical recovery appeared unlikely in the face of
continued household debt and high levels of unemployment. High
quality defensive stocks and exposure to developing economies
emerged as some of the key investment focuses for 2010. Opening the
discussion, Iain Stewart, Investment Leader, global funds at
Newton, commented: "We're entering a less leveraged and higher
savings environment which means that both the supply of, and demand
for, credit are likely to be significantly reduced. As a result of
this, we are entering a structural rather than a cyclical change
which may last for many years to come. "Our theme-led approach
helps to identify sectors that we believe will benefit from the
continuing change in financial markets. We are fully invested to
take advantage of this change by focusing on very high quality
defensive areas as well as those companies we believe stand to
benefit from growth in emerging markets." Ben Russon, Investment
Manager - UK Equities, added: "Many UK companies have positioned
themselves for a more bullish outlook than we expect. With the
pressures of unemployment, levels of debt and restricted access to
credit for the foreseeable future, recovery is likely to be fragile
and elongated. We are therefore currently avoiding economically
sensitive areas of the market and are positioning ourselves in
non-cyclical sectors where we see the best value in line with our
thematic investment approach." Looking to Europe, the feeling was
that it had not experienced the property bubble that had hit the US
and UK markets and many European economies entered the recession
with lower levels of leverage. Raj Shant, Investment Leader,
Pan-European equities, suggested Europe was better positioned for a
recovery than other developed markets. He said: "With the European
Central Bank pumping money into Europe's money markets as far back
as the summer of 2007, Europe has been better placed to weather the
recent crisis than the US or the UK. Also, the announced government
stimulus programmes will likely have more of an economic impact in
2010 than they have to date." He added that European growth was
also less reliant on consumers and more export driven, an area
which was seeing strong recovery boosted by demand from the
emerging economies. However, he cautioned that the Euro's continued
strength may start to impinge on exports and become a source of
dispute with trading partners. Looking ahead, Shant said Germany's
recovery as the engine of Europe could see the European Central
Bank raising rates next year, putting pressure on the weaker
peripheral economies. Simon Laing, Investment Manager, US Equities,
was just as pessimistic about a lasting recovery: "Whilst the short
term outlook remains positive, the sustainability of growth beyond
2010, with consumption unlikely to rise significantly, will need to
be driven by a return of private investment spend. The risk of tax
increases and government policy mistakes will likely handicap this.
" Increased mergers and acquisition activity is likely to be the
next driver of growth in many Asian markets, according to Jason
Pidcock, Investment Leader, Asia-Pacific Equities. "With Asia in
line with the 10 year average, markets could easily go higher,
driving leverage buyouts and cross border trades as we saw at the
end of the mid-1980s boom," he said. "Many Asian companies should
benefit over the longer term from the relative strength of their
balance sheets, with corporate indebtedness significantly lower in
Asia than in the US and Europe". Charlotte Ryland, Investment
Manager, global funds said: "We are currently undergoing a period
of global realignment whereby Western economies are in the midst of
adjusting to lower growth, lower levels of leverage and
significantly more regulatory oversight of the banking system. As a
result of this realignment, the developing world continues to
present longer-term investment opportunities, particularly those
countries able to stimulate domestic demand such as China, India
and Brazil. "Equity risk should remain biased towards relatively
economically insensitive sectors with stable cash flows and visible
earnings such as telecoms and medical technology. Commodities such
as oil remain interesting, driven by new sources of demand and
declining production." Iain Stewart fuelled this cautious approach
to the next few years, concluding: "While we cannot predict the
shape of the recovery, our theme-led investment strategy enables us
to take advantage of those sectors that are positioned for growth
over the coming years. We believe our defensive positioning will
ensure that we emerge in better shape than those investors who have
put all their money in very high beta stocks." Notes to Editors:
Newton* is a London-based global asset management subsidiary of The
Bank of New York Mellon Corporation and part of BNY Mellon Asset
Management. With assets under management of more than $65 billion,
including assets managed by Newton Investment Management as dual
officers of Newton Capital Management Limited and The Bank of New
York Mellon, Newton's group of affiliated companies provides a
broad range of award-winning investment products and services to
individuals, pension funds, charities and corporations. News and
other information about Newton is available at
http://www.newton.co.uk/. BNY Mellon Asset Management is the
umbrella organisation for The Bank of New York Mellon Corporation's
affiliated investment management firms and global distribution
companies. BNY Mellon is the corporate brand of The Bank of New
York Mellon Corporation. BNY Mellon is a global financial services
company focused on helping clients manage and service their
financial assets, operating in 34 countries and serving more than
100 markets. BNY Mellon is a leading provider of financial services
for institutions, corporations and high-net-worth individuals,
providing superior asset management and wealth management, asset
servicing, issuer services, clearing services and treasury services
through a worldwide client-focused team. It has $22.1 trillion in
assets under custody and administration and $966 billion in assets
under management, services $11.9 trillion in outstanding debt and
processes global payments averaging $1.6 trillion per day.
Additional information is available at http://www.bnymellon.com/.
*'Newton' refers to the following group of affiliated companies:
Newton Investment Management Limited, Newton Capital Management
Limited, Newton International Investment Management Limited, Newton
Capital Management LLC and Newton Fund Managers (CI) Limited.
Assets under management include assets managed by all of these
companies except Newton Capital Management LLC, which provides
marketing services in the U.S. for Newton Capital Management
Limited. Except for Newton Capital Management LLC and Newton
Capital Management Limited, none of the other Newton companies
offer services in the US and Canada. Newton Capital Management
Limited is an investment management firm authorized and regulated
in the United Kingdom by the Financial Services Authority in the
conduct of investment business and is a wholly owned subsidiary of
The Bank of New York Mellon Corporation. Registered in England no:
2675952. Newton Capital Management Limited is registered in the
United States as an investment adviser under the Investment
Advisers Act of 1940. All information source BNY Mellon Asset
Management as at 30/09/09. This press release is qualified for
issuance in the UK, US and Canada and is for information purposes
only. It does not constitute an offer or solicitation of securities
or investment services or an endorsement thereof in any
jurisdiction or in any circumstance in which such offer or
solicitation is unlawful or not authorised. This press release is
issued by BNY Mellon Asset Management (US & Canada) and BNY
Mellon Asset Management International Limited (ex-US/Canada) to
members of the financial press and media and the information
contained herein should not be construed as investment advice. Past
performance is not a guide to future performance. Registered office
of BNY Mellon Asset Management International: The Bank of New York
Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA.
Registered in England no. 1118580. Authorised and regulated by the
Financial Services Authority. A BNY Mellon Company(SM) DATASOURCE:
BNY Mellon CONTACT: Vee Montebello, +44-20-7163-6246, , or Patrice
Kozlowski, +1-212-922-6030, , or Sarah Deutscher, +44-20-7163-2744,
Web Site: http://www.bnymellon.com/
Copyright