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Carmignac: what to expect in 2013
by Atholl Simpson on Jan 16, 2013 at 12:53
The firm’s Didier Saint-Georges reveals the biggest risks facing global investors and why France needs a leader like Winston Churchill.
'The political challenge is to maintain, or restore, public confidence in Europe; to get Southern countries to accept the very high social cost of adjustments, and the North to accept the financial cost of interdependence,' says Saint-Georges.
'The unifying role that Mario Monti may or may not play in the next Italian government will be decisive, as will the French government’s ability to demonstrate political leadership (preferably à la Churchill) to impose the necessary structural reforms on public spending.'
'For her part, Angela Merkel will have to convince voters that slashing deficits without establishing conditions to ensure that these criteria are respected over the long term, and thus protect growth, would be a bad move in the medium term.'
'The challenges that European leaders will have to overcome to bring international investors back for the long haul remain huge.'
'In China, the traditional argument of absolute political continuity, and with it the formal handover of leadership, is an undeniable strength. All the more so today as Li Keqiang, the country’s premier-designate, is a long-time protégé of the outgoing president, Hu Jintao.'
'However, we should not underestimate what leading Communist Party figures have done to bring about major change in China’s economic journey. Xi Jinping, the new president, will have to carry out extensive reforms made necessary by heavier social pressure in the country and by the structural decline of exports and investment as primary growth drivers.'
'Alongside reform of the capital market, state monopolies and fiscal policy, urbanisation will be one of the areas most in need of reform.'
'It is encouraging to note that Xi Jinping confirmed this priority for 2013 at the Central Economic Conference in mid-December.'
'Perhaps more in the United States than elsewhere, politicians are holding the keys to their economy in 2013. As we predicted this summer, the much publicised fiscal cliff and its recessionary impact so feared for the economy have been avoided.'
'Admittedly, the risk remains that the weakness of the agreement will do little to convince US companies to enter quickly into a new, long awaited investment cycle. Negotiations on the public debt ceiling have not begun and will be the subject of some perilous jostling between senators and representatives in the next couple of months.'
'However, the tax increase side of things has been cleared up and politicians have everything they need to negotiate public spending cuts that will not thwart the economic recovery.'
'In Japan, weariness is making many investors sceptical about how much impact the election of a seventh prime minister in six years could have on Japanese companies’ extremely poor confidence at the end of 2012.'
'However, Shinzo Abe’s determination to put an end once and for all to the country’s chronic deflation and sluggish growth is worthy of attention.'
'In the space of a few weeks, the Bank of Japan has already been urgently directed to relax its policy considerably and even give up some of its independence. Mr Abe has also announced a very proactive fiscal stimulus policy.'
In red on the graph we can see the Patrimoine fund has returned 2.99% while its LCI MSCI World Free/Citigroup WGBI TR (50:50) benchmark has risen 4.77%.
Over the same period, the Investissement fund (in blue) has also underperformed in the short-term posting returns of 4.55% while its MSCI AC World TR EUR benchmark has risen 10.53%.
However, the results improve when we look at the longer-term...
In both cases the Patrimoine and Investissement funds have beaten their benchmark over five years till the end of November 2012.
Over that period the Patrimoine fund (in red) returned 31.57% against a 27.59% rise of its benchmark while Investissement (in blue) posted returns of 13.5% while its benchmark rose 7.55%.