Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

MRB's Chart of the Week: Finding the risk assets with legs

MRB's Chart of the Week: Finding the risk assets with legs

MRB has been overweight Korean and Swedish equity markets and currencies in our global asset allocation in the past few months. The reasons to stay long these markets are compelling:

  • The Korean and Swedish equity markets are both levered to the global economic cycle, with listed companies deriving a substantial portion of their profits overseas.
  • These equity markets are mostly composed of highly cyclical sectors and have an extremely low weighting in defensive sectors. Globally, the former are gaining a following, while the latter are losing their allure.
  • The Korean and Swedish economies have both downshifted over the past year. However, these economies do not face deleveraging headwinds and domestic policy settings are accommodative. In fact, prior easing should encourage a pickup in business activity this year, benefiting domestic earnings and related equities (including financials).
  • Valuations are appealing. Korean and Swedish equities trade at comparable valuations to their peers around the globe, despite having stronger earnings potential.
  • From a technical perspective, these markets have recently rallied, but are not yet overbought. We expect further upside in the coming months.

 It is worth noting that MRB also likes German equities for many of the reasons listed above. We also like the Korean won and Swedish krona as a way to obtain exposure to improving global growth prospects, and prefer betting on the crosses versus the Japanese yen.

As our recent Strategic Trader report noted, these cross rates tend to be highly cyclical, appreciating during global expansion phases and depreciating during recessions. The won/yen and krona/yen crosses are highly correlated, so investors may wish to play only one or buy an equally-weighted basket of both.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Sarasin’s Boucher: why I like salmon with chocolate

Sarasin’s Boucher: why I like salmon with chocolate

Henry Boucher, manager of the £129 million Sarasin Food & Agriculture Opportunities fund, explains why he is gobbling up salmon and chocolate stocks.

Play Alibaba hype, the UK slowdown and opportunities in European sovereign bonds

Alibaba hype, the UK slowdown and opportunities in European sovereign bonds

Libby Ashby and leading wealth managers analyse what the Alibaba IPO hype means for Chinese equities, slowing growth of the UK economy and whether there’s anything left to play for in the European sovereign bond market.

Play Tesco, Japan and the rise of the central banker

Tesco, Japan and the rise of the central banker

 Libby Ashby and leading wealth managers scrutinise the food retail sector, Japan’s consumption tax hike and political risk in the markets.

Your Business: Cover Star Club

Veteran banker boosts Sanlam’s stockbroking team

Veteran banker boosts Sanlam’s stockbroking team

A veteran private banker has been recruited by Sanlam Private Investments to strengthen its advisory stockbroking team.

Wealth Manager on Twitter