Fund manager Pictet said that while equity markets are not cheap, it is seeing some bargains emerge in the emerging markets.
Pictet chief strategist, Luca Paolini, said that while emerging market equities have been under pressure from a stronger dollar and higher US interest rates, as well as escalating trade tensions, there are signs that the worst is over. He commented: “Developing economies’ real GDP is growing faster than developed economies, and the recent decline in energy and commodity prices should offer additional support to manufacturing. China is a particularly bright spot, with strong consumption and construction activity.”
Paolini added that emerging market equities are now trading at a discount of over 20% to developed markets, which should encourage bargain hunters. Overall, he added that Pictet is lifting its view on equities from underweight to neutral. “Japan remains our favoured developed equity region, but we are cautious on Europe, given the possible impact on growth from US trade measures, especially on export dependent Germany. We remain underweight expensive US stocks, particularly as US companies look unlikely to repeat their blockbuster earnings performance of recent months,” he added.