Emerging markets equities, especially those in Asia, are likely to deliver a good returns in 2017 to investors with the appropriate risk appetite, given the improved macroeconomic fundamentals in these economies, said an industry expert.

“While the new year is usually a good time to review investment strategies, we don’t expect the current economic cycle to end anytime soon,” added Cedric Lizin, head of Middle East and Africa, Barclays Wealth and Investment Management.

“In light of world economy growth being at just above stall rates, we recommend maintaining a tactically diversified portfolio, as it is essential for protection against market volatility. We also advise to keep investment portfolios tactically tilted towards Developed Markets Equities, with a focus on the US and continental Europe.”

Lizin was commenting on latest edition of the Compass report, published by Barclays, which examines major asset classes globally.

The report includes the bank’s tactical recommendations on portfolio asset allocations. Published by the Barclays’ Wealth and Investment Management division, the quarterly research focuses on providing investment advice and recommendations to investors around the world, including the Mena region.

The US stock market, which has rallied recently to record highs driven by banking, industrial and technology equities, is seen as the market of choice within the asset class. Meanwhile, continental Europe and UK equities came in second and third place respectively.

The report has increased its allocation to Emerging Markets Equities from neutral to overweight, as the business cycle is seen to have reached bottom, a view that is supported by business confidence surveys and trade data. In addition, the fundamental economic factors have positively influenced corporate profitability within the asset class.

Meanwhile, ‘Compass’ lowered its neutral allocation for Cash & Short-Maturity Bonds to underweight, due to the increased appeal of Emerging Markets Equities. In terms of Developed Government Bonds, the Q1 2017 Compass report has lowered its allocation from neutral to underweight, citing the negligible returns for most government bonds in the developed markets.

The report also maintained its overweight allocation to High Yield & Emerging Markets Bonds; this is in light of a more upbeat outlook on various risks to global growth and inflation, in addition to the attractiveness of yields on junk credit, based on a risk-reward basis.

The latest edition of the report has assigned an underweight allocation to Investment Grade Bonds, due to minimal returns on high quality corporate credit. Meanwhile, Compass assigned a neutral allocation to Commodities, highlighting that investors are more likely to benefit from tilting their investments towards oil as supply/demand issues subside.

Meanwhile, gold is seen as a less attractive option as it continues to be susceptible to further US interest rate hikes. Additionally, the report assigned a neutral strategic allocation to Real Estate and an underweight to Alternative Trading Strategies. – TradeArabia News Service