chief investment officer bob yerbury voices concerns over when market will see upturn as group launches phasing option on isa packages
Invesco Perpetual remains bearish on the likelihood of a turnaround in the equities markets this year, according to chief investment officer Bob Yerbury.
With the Isa season approaching, the group has made a bid to win over uncertain investors with the launch of an investment phasing option on its Isa packages, allowing assets to be drip-fed into the market or held until market conditions improve.
Yerbury said the global downturn in equity markets since spring 2000 was different from almost all previous downturns in that it was not partnered by a banking crisis.
The banking crisis in Japan did not alter this view, as it has persisted for over a decade. As well as the crisis in Japan has been coming with a government message; that it was not going to apply drastic measures until there was a 'major' banking crisis, which could be interpreted as more sitting on hands, giving the Japanese market little chance of outperforming.
Asian markets ex-Japan hold more promise, Yerbury said, as prices were cheap and earnings were looking relatively solid, while the UK looked to have broken the boom-and-bust cycle.
Speaking in Edinburgh at the group's nationwide roadshow, which concluded last week, Yerbury's said that US equities are still on historically high P/E multiples and there was significant potential for more bad earnings news to come, impacting markets.
On the fixed income side, Paul Causer, manager of the company's Monthly Income Plus Fund, said 2001 was a strange year as several blue chips, such as Marconi, British Airways and Railtrack, went from corporate ratings to junk bond status.
However, extremely low inflation expected through this year would set corporate bonds up for another year of good performance. With inflation below 1% on average across the G7, equity yields will continue to be pressed, while those choosing between government and corporate bonds will see the latter yield better returns.
A and BBB-rated corporate bonds should outperform government paper quite easily, Causer added.
Using the example of British Telecom, Causer said that debt and other issues will weigh down the company's share price but the long-term bond yield was at about 7%.
In the case of Colt Telecom, there were bonds maturing in 2007 that are offering yields of more than 13%.
With regards to polarisation, Invesco Perpetual's head of UK retail, Mike Webb, said Invesco would remain a wholesaler dependent on the intermediary to make the sale to end customers. Breaking down the proposed changes that depolar- isation would bring about, he said there would be an increasing separation between manufacturing and distributing products. This would be coupled with an increasing amount of margin pressure and a need to improve operational efficiency.
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