Nothing seems to prevent investors from going risky in 2013, especially as the IMF expects a slow but confident recovery of the global economy this year. Central banks won’t see any problems with liquidity as quantitative easing programs around the globe are underway. In this aspect, investors are not likely to keep investing in low-yield assets offered by developed economies. More investors tart focusing their attention on emerging markets, which seems more promising in terms of ROI.
Numerous financial experts and top-ranking financial officials (including Ben Bernanke, Nouriel Roubini, George Soros etc.) make cautious forecast for 2013. Still, they are pretty much confident that the eurozone will manage to avoid further economic and financial shocks while the USA will avoid the “fiscal cliff” and China will overcome the current economic slowdown.
Well, let’s hope that none of the major ‘newsmakers” won’t provoke panic in financial markets. If there are no threats, what’s wrong with investing some cash in riskier assets?
Stocks or Fixed Property?
According to Reuters, investors have regained confidence in the so-called BRICS (Brazil, Russia, India, China, South Africa). Since 2002, when the BRICS stock exchanges accounted only for 3% of the World Federation of Exchanges (WFE), their share has increased u to 20%. However, the emerging BRICS markets have been underperforming over the last few years. Smart investors know that now is the time to pick the assets from the bottom…
Obviously, when it comes to emerging economies, China remains the most popular place for foreign investors. However, some experts assume that the times of super performance are over. In 2007, if you invested in the SPDR S&P China ETF (180 Chinese stocks), you could count on a 100% yield (or more). You can also risk by investing in another Chinese stock index - Shanghai Composite – on of the few key indexes that has been remained bearish this year (almost 50% down since 2007). Today, it is one of the favorites. Most investors interviewed by Reuters are planning to invest in it in 2013 as they anticipate a 17% increase (on average).
The forecast for the Chinese housing market looks controversial. While some experts assume that China’s housing prices will keep growing, others say that they will grow only in separate regions, other regions will see a decline in the local housing markets.
Analysts say that the stable demand in the market of residential property will lead to even higher demand as the amount of deals is expected to boost by 15% this year. Beijing and Shanghai will be the frontrunners in terms of price growth (at least 5%). At the same time, residential property in small towns will be depreciating.
Beijing. Penthouse - €1 600 000. Renting – 4-7% per year (€112 000).
As for the stock indices of India (Sensex), Brazil (Bovespa) and Moscow (RTS), they are also expected to boost some 14-15% in 2013. The chances are even bigger this time as they failed to enter the TOP 5 indices in terms of performance even though they finished the year in the green zone.
Japan and the Mediterranean
A lot of investors are planning to invest in another promising index –Nikkei. The Liberal Democratic Party of Japan won the parliamentary election in late 2012. This is expected to stimulate the bullish trend, especially as the Japanese government promised to fight deflation and exert pressure on the Bank of Japan.
According to , the Japanese stock market is expected to strengthen in 2013. Most experts expect the Japanese yen to weaken, which will stimulate production and export. As the Japanese economy is an expert-oriented one, investing in Nikkei looks quite logical and promising.
Another promising area is the Mediterranean (including Spain and Italy, especially as they are backed by the ECB). In 2012, the Italian stock market gained only 10% while the Spanish one barely entered the green zone. That is why their assets looks undervalue. According to a survey, 50% of the interviewed managers are interested in the stock markets of peripheral eurozone economies. European assets strike back in 2013. Investors bet on EuroSTOXX 50 rather than S&P 500 and Spanish bonds rather than German assets. They are also planning to profit from investing in the bond and housing markets of other peripheral economies.
It is not accidental that Carlos Slim, the world’s richest person, bought a portfolio of housing assets from Caixabank, a Spanish bank. It contains 439 housing units and is estimated at $577,5 million. The news provoked a new way of purchases in the Spanish housing market.
Spain . Costa Blanca South. Bugalo.€231 000.
Venezuela – Dark Horse
Venezuela promises to become the dark horse of the year. The political situation in the country contributes to that. We may even see reelections as Hugo Chavez still cannot recover from the disease.
MSCI Mexico has gained 481% over the last decade. For comparison sake, S&P 500 SPDR ETF has gained only 53% over the same period.
Some risky investors try African and Middle-Eastern assets. Some of them bet on Iraq, which is still recovering after Hussein’s regime. The World Bank anticipates the strengthening of the Iranian economy by as much as 25,4%. The local stock market is relatively tiny – only $4bn. However, some big-scale companies are planning IPO this year, which will increase the aggregate market capitalization. Some experts expect some local “blue chips” to get their liquidity increased. At this point, only 40% of the Iranian stock index – ISX – is available for trading.
As for Israel, experts do not expect a bearish trend. However, there is a chance of a minor price decline in the housing markets of Tel-Aviv, Netania, Jerusalem and some other Israeli cities.
Israel. Netania. Townhouse. €686 000.
Expert Opinion On Emerging Markets.
According to Eugene Olkhovsky, ’s leading expert in financial markets from Canada, the major problems that may hinder the near-term prospects are the eurozone crisis and the fiscal cliff in the USA. Obviously, the eurozone crisis won’t go anywhere in 2013. The global economy is recovering but to slowly. Yet, there are no reasons to expect any acceleration as major economic problems cannot be resolved in an instance.
China and the USA represent the lion’s share in the global economy. However, despite some positive tendencies, rating agencies (including Fitch) are not planning to improve sovereign ratings in the near future.
Despite the fact that emerging markets are showing some strength, the current economic situation in the eurozone and the USA may well hinder it. It should be noted that emerging economies has an opportunity to delay the consolidation of their budgets till a better situation presents itself.
