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The Global Investor, our financial newsletter
  April 2004 - Issue 28 Previous Issues  

The Global Investor is a monthly newsletter that covers global investment opportunities and insurance for the expatriate community. This monthly newsletter's goal is to inform the reader of what can and cannot be done in the investment arena when living and working in a foreign country. Whether it's personal pension plans or disability insurance to protect your income - Global Investments has the expertise to handle all the expatriate investors' needs.

Threadneedle Investments
ECONOMIC & MARKET COMMENTARY
April 2004

UK   USA
  • It has been a volatile week in UK equities, with the market tracking bond yields lower early on before recovering as yields rose. The FTSE 100 finished the week 0.1% higher in US dollar terms.
  • We have seen a compression in valuations over the past few weeks, such that defensives, growth stocks and cyclicals all now trade on similar ratings.
  • We are looking for derated 2005 growth stories and have been adding to Reed in this vein. Other additions include hedge fund manager Man Group, which released impressive numbers this week.
  • Less impressive was Boots, which announced decent sales figures but disappointed on profits as a result of margin pressure. We have removed this stock from our core list.
  • In other portfolio activity, we have been adding to house builders, which are benefiting from a positive regulatory backdrop following the budget.

 
  • US equities performed well this week amid a more risk-friendly tone, with investors focusing less on the terrorism threat and more on the prospect for strong economic data in the next few days.
  • The S&P 500 and the NASDAQ ended the week 2.5% and 4.3% higher respectively in local currency terms.
  • The more positive tone has seen airlines benefit from improved yields. A slight easing in the oil price also assisted these stocks, to leave them among the best performers on the week. Conversely, energy stocks under-performed as the oil price slipped.
  • Meanwhile, technology has benefited from some good data releases, with Red Hat (distributors of the Linux operating system) announcing strong trading numbers.
  • The industrial sector continues to perform well, but we are aware that the current quarter could be the peak for earnings. Our preference within this sector remains for agriculture stocks.
EUROPE   JAPAN
  • European equities performed well this week, with the FTSE World Europe ex UK Index rising by 1.3% in US dollar terms.
  • Themes have been few and far between. For example, the German retail sector released a mixed set of results, with electronics outlets doing well while department stores disappointed.
  • In the reinsurance sector, meanwhile, Swiss Re and Hanover Re issued encouraging trading statements.
  • Elsewhere, there were unsubstantiated rumours concerning Vivendi possibly selling its media assets and even becoming a takeover target itself.
  • There has been little change to our portfolios, which remain tilted in favour of cyclical stocks, albeit with a trimmed position in early cycle industrials reflecting the maturing economic recovery.
 
  • Japanese equities once again led the developed world this week, with the TOPIX and the JASDAQ ending the week 5.5% and 4.2% higher respectively in US dollar terms.
  • The key driver was continued foreign buying, supported by strong readings on CPI and household spending which suggested that a recovery was underway in the domestic economy. Domestic sectors such as banks and retail are the key beneficiaries from such a recovery.
  • The stronger economic data drove the market to the conclusion that the authorities might allow the yen to strengthen against the US dollar, and this became a self-fulfilling prophecy as the currency moved back towards 105/$.
  • There has been no change in our portfolio positioning.
FAR EAST & EMERGING MARKETS   BONDS
  • The more risk-friendly global mood worked to the advantage of Asian equities, with the FTSE World Asia Pacific ex Japan Index rising by 0.9% on the week in US dollar terms.
  • A recent trip to Asia left us with positive views on Hong Kong and India. In the former market, economic integration with mainland China is on track and the hotel and retail sectors are set to benefit from an explosion in tourism. In India, meanwhile, we are seeing strong growth, fuelled by agriculture, infrastructure upgrades and domestic consumption.
  • Elsewhere in the emerging markets, we have been adding to Russian stocks in the telecoms and oil sectors. In both cases, the companies are attractively valued relative to their global peers.

  • Strong economic data from Japan caused global government bond yields to break out of the top end of their recent range.
  • With the long-awaited US non-farm payrolls report to come in the next week, together with Chicago PMI and ISM releases that are likely to be on the strong side, we believe yields will continue to move higher, so we remain short in duration across the regions.
  • In the UK, reports out in the last week showed that consumer debt and mortgage applications continue at high levels. This makes a rate hike in April more likely.
  • Investment grade corporate bonds are benefiting from a more constructive tone and are also looking better value after their recent under-performance. We are considering closing our underweight position here.
Please contact Global Investments for more information
on Tel. (+66-2) 662-2009 or e-mail at info@globalinv.org.

 
 
 
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