Zeitgeist check

May 11, 2009

Some more bits and bobs to capture the current mood among investors:

— MSCI’s all-country world stock index has recaptured all of its 2009 losses and is now working on recouping last year’s. It is up 6 percent for this year.

— Fund researchers EPFR Global notes investors are moving at pace out of cash into emerging market equity and bond funds. In the week to May 6 a net $3.6 billion moved into various emerging stock funds. Money market (cash) funds saw outflows of $1.6 billion.

State Street says there has been a “sea change” in investor behaviour. In April cross-border flows that it tracks suggested the most risk-seeking investment regime since May 2008.  “Institutions are buying emerging markets aggressively, adding to entrenched positions in Latin America and diversifying into emerging Asia,” it says.

— It is all obvious from the front end of the financial sector’s credit default swaps, according to Royal Bank of Scotland’s Alan Ruskin. Essentially, the hyper-stress is easing. “If financials grease the wheel that is the real economy, it is easy to see where the equity ebullience has come from,” Ruskin says.

— Merrill Lynch’s Global Wealth Management says it is still worth putting all this in context. “Equities are still 30 percent below the levels ruling on the eve of Lehman’s collapse.  Some European markets have suffered much deeper falls. Implied default rates in the corporate bond markets are still more pessimistic than the worst experience in seventy years,” it tells its clients.

(Reuters photo: Goran Tomasevic)

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