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Abu Dhabi, UAESaturday 15 December 2018

Swiss private bank Lombard Odier bullish on European, emerging market equities

Odier's chief investment officer favors countries including Brazil and Argentina

The Swiss private bank Lombard Odier’s chief investment officer is advising his clients to buy European and emerging market equities because of good growth prospects.

Despite concerns emerging from some corners about high global equity valuations, Stephane Monier said that they are by and large justified by an improvement in the global economy and company earnings.

“We have synchronised growth, and the environment for financial assets is favourable, and we think it will stay favourable for a while,” said Mr Monier.

“We are not yet at the stage where we expect a crisis. I think stock markets are going to continue to do well, and high-yielding assets are going to continue to do well. We are in a special circumstance where all the major economies in the world are synchronised and growing at the same time.”

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Global stock and bond markets have neared record highs this year as a result of stimulus measures by central banks and low interest rates that were put in place in the aftermath of the 2008 financial crisis.

The S&P500, the benchmark gauge of US equities, hit an all-time high this month, having gained nearly 14 per cent this year. Such rises in the US and elsewhere have prompted concern among a number of billionaire investors, such as Warren Buffet, that valuations are not cheap.

The International Monetary Fund said this month that it expected global GDP to rise by 3.6 per cent in 2017 and 3.7 per cent in 2018, a 0.1 percentage point increase for both years from the April forecast.

Mr Monier said, however, that emerging market equities, which for many years were unloved by investors until last year, show promise, as many developing nations turn the corner following difficult years of low commodity prices and political turmoil.

The chief investment officer of the Swiss bank particularly favours Brazil and Argentina, countries where political change is bringing economic reform.

“The growth is improving in Latin America,” Mr Monier said. “It’s linked to political reform. If you take a recent example that we are quite positive on is Argentina. Last weekend, there were elections in Argentina, and Mauricio Macri, who is in power, won the election, and for us it’s very good news because Argentina will be able to continue its reforms.”