The future of equity markets will very much depend on what the big money in Asia will do. McKinsey has argued there will be a $12
trillion shortfall in equity investment by the end of the decade, a notional figure that has the advantage of being untestable. Royal Bank
of Scotland has has a look at sentiment in Asia and has concluded it is pretty gloomy:
We have just completed a week-long roadshow through the Asian investor base and conclude that positioning is almost universally defensive. Australian healthcare names were well-held, although valuations were acknowledged to be stretched at these levels. The Australian dollar and the two-speed economy were concerning most, with widespread concern about the competitiveness of corporate Australia. Investors were generally still encouraged by the gradual recovery of the US economy and its relatively defensive position vis a vis Europe, and were interested in Australian names with leverage to the region. On the European situation itself, most had given up following the nuances of the battle between policy and markets, and were awaiting the outcome for Greece and stability in Spain and Italy.
No surprise that the markets are global, not even regional. RBR reckons that there is cosniderable caution about China, even confusion. Where there are usually strong opinions, this time there is a strange quiet. The leadership transition is given as the cause. RBS concludes it is not positive for Australian resources stocks:
Clearly, the impending leadership transition is leaving China particularly cautious, but has also probably slowed the communication flows about policy and intentions. With this lack of directional view, Australian resources were an underweight or unheld sector for most.