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Across the Spectrum - 1st July 2009

The outlook for emerging markets is "far more optimistic" than for developed economies as growth picks up, said investor Marc Faber, who advised investors to buy gold before its eight-year rally. "We are living through major changes in the world," said Faber, the publisher of the Gloom, Boom and Doom report. Emerging markets such as China are becoming more significant to the global economy, and "I don't think this will be reversed," he said on Tuesday at an AsianInvestor magazine forum in Seoul. The MSCI Emerging Markets Index has jumped 35% since the end of March, headed for a record quarter after inflows from investors increased substantially and stimulus plans from China to Brazil bolstered confidence. That compares with a 21% increase in the developed market MSCI World Index. No developed markets rank among the year's 10 best performers out of 89 global indexes, according to Bloomberg. Peru and China have led gains.

Oil, copper and emerging market stocks rose as evidence that the worst of the global recession has passed fanned appetite for high-yielding assets. Crude oil advanced as much as 2.6% in London early on Tuesday, rising to the highest level in eight months. Crude oil for August delivery rose to USD 73.38 a barrel on the New York Mercantile Exchange. Copper for three-month delivery on the London Metal Exchange gained 1.4% on optimism industrial demand will rebound as the global economy recovers. Copper has risen 68% this year. The MSCI World Index of 23 developed nations added 0.4% on Monday, extending its biggest quarterly gain since 1987.

The dollar declined against 13 of the 16 most traded currencies before a US government report today that economists say will show consumer confidence rose to a nine-month high in June. The dollar weakened to USD 1.4104 per euro in London earlier on Tuesday from USD 1.4083 in New York on Monday. The dollar depreciated to USD 1.6607 per pound from USD 1.6567, after sliding to USD 1.6743, the weakest level since 21 October last year.

Deutsche Bank AG, Germany's biggest lender, raised its forecast for global growth next year, predicting that the world economy will expand 2.5%, compared with a March forecast of 2%. Increased demand for assets with higher returns is fuelling gains in oil and reviving capital flows into emerging markets, Bank of America-Merrill Lynch said on Tuesday. "Risk-asset markets have shaken off their lethargy of last week to begin a renewed push higher," Steven Pearson, a strategist at Bank of America in London, wrote in a report. "It is not clear whether market participants are starting to contemplate the prospect of a quiet summer or are simply becoming more comfortable with the macro outlook."

Japanese industrial output increased 5.9% in May compared with the month before, the third consecutive monthly climb, according to official data. The rise last month was the same as April's revised figure, though less than analysts' forecasts of 6.9%. The output of cars, mobile phones and electronic devices was particularly strong as firms started to reverse earlier cuts in stock levels. But analysts predict output could slow again. "Production has been rebounding sharply in response to earlier drastic cuts but the momentum is likely to slow in the months ahead," said Hirohi Watanabe, an economist at the Institute of Research in Japan.

The eurozone's annual rate of inflation turned negative in June for the first time since the single currency was introduced in 1999. Prices in the eurozone fell 0.1% in the past year, Eurostat said. The inflation rate had been 0% in May. Inflation has been dragged down by lower energy and food prices, and by falling demand for goods from companies and household.

Spotlight on the investment opportunities from a changing climate

Climate change will alter the shape of the global economy over the coming years. As a result there is an expectation the environmental technologies sector will benefit and grow, providing attractive, long-term investment opportunities for global investors.

It is important to note, however, it is not only the renewable energy sector that will benefit from the changes required to deliver a low-carbon economy. Companies emerging from sectors, such as energy efficiency, water infrastructure and pollution and waste control also have contributions to make in addressing not only climate change, but also wider environmental threats facing society. Growth in this sector will, in part, depend on access to capital by companies emerging in all of these areas.

Additionally, it is necessary for the global economy, including governments, to facilitate capital investment flows into the environmental markets arena. Today, investors are already seeing the start of this evolutionary phase, with governments across the globe pledging high proportions of their economic stimulus packages towards environmental technology investment.

The focus on climate change and its implications in terms of assessing economic cost and portfolio risk is being highlighted increasingly by political and industry commentators worldwide. This includes two of the world's most powerful economies, the US and China, whose pledges in this field have made it clear that addressing the impact of climate change is critical to economic growth and prosperity, despite current market conditions. Incentives derived from economic stimulus packages are expected to play an increasing role in this growth over the coming years.

As many of the drivers of the environmental markets catch political and public attention, such as energy security and supply, water scarcity and disruptive weather patterns from a changing climate, those companies and sectors providing solutions to these issues will attract the interest of global investors. Attractive returns may be achieved from the investment opportunities emerging from the leading companies in these sectors.

This increased interest will challenge the industry and index providers to develop to tools to reflect this growth and suit the needs of a variety of investment strategies. The challenge for the next decade is to continue to build on these many successes. Global investors will have a key role to play in decarbonising economies, rewarding companies that adopt sustainable and responsible business practices.

The information set out herein has been obtained from various public sources and is published by way of information only. The Spectrum IFA Group can accept no liability of any sort in relation there to and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

 

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

 

This information is only provided as a guide and, if you need assistance in this area you are strongly advised to seek the help of a specialist in this field as each individual case is different.

 


If you have a question, want to arrange for a free financial review or just want further information I can be contacted on +33 (0)325461631, via my website
www.financialexpat.com or via e-mail steven.grover@spectrum-ifa.com  
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