Global Investing

UK investors warm to European stocks

British investors are warming up to European equities, with the highest level of positive or rather positive views of the troubled bloc’s stocks in a year, an online survey by Baring Asset Management shows:

The biggest rise in sentiment was seen towards European equities, with over half (53%) of respondents saying they were now either ‘quite’ or ‘very’ favourable, up from 42% in the last survey and the most favourable they have been towards the European equity sector for a year.

UK investors remain more positive on stocks from emerging markets, the United States and Asia ex-Japan, but with ratings down from the previous poll three months ago, and UK equities are also viewed more favourably. The poll answered by just over 100 respondents between Aug 22-Sept 19 shows the euro zone crisis is still considered the biggest global economic challenge.

Rod Aldridge, Head of UK Retail Distribution at Barings, says:

It seems that while the majority of advisers remain deeply concerned over the euro zone debt crisis, some are sensing opportunities in what is a critical time in the evolution of the euro zone and the political and monetary efforts to support the bloc.

Contemplating Italian debt restructuring

This week’s evaporation of confidence in the euro zone’s biggest government debt market — Italy’s 1.6 trillion euros of bonds and bills and the world’s third biggest — has opened a Pandora’s Box that may now force  investors to consider the possibility of a mega sovereign debt default or writedown and, or maybe as a result of,  a euro zone collapse.

Given the dynamics and politics of the euro zone, this is a chicken-or-egg situation where it’s not clear which would necessarily come first. Greece has already shown it’s possible for a “voluntary” creditor writedown of  the country’s debts to the tune of 50 percent without — immediately at least — a euro exit. On the other hand, leaving the euro and absorbing a maxi devaluation of a newly-minted domestic currency would instantly render most country’s euro-denominated debts unpayable in full.

But if a mega government default is now a realistic risk, the numbers on the “ifs” and “buts” are being being crunched.

Irish SWF: Died Nov 2010 aged 9

National Pensions Reserve Fund, born April 2001, died November 28th, 2010; survived by a sister, Nama.

 Irish Times wrote today an obituary for Ireland’s sovereign wealth fund NPRF, which was originally set up at the start of the last decade to plug future pension shortfalls.

 AUSTRIA/

But it never lived to fill this purpose. The 25-billion euro NPRF, which boasts its membership to the world’s elite SWF club, has died a sudden death although it has been suffering a capital haemorrhage last year, when the government amended the rule and used 7 billion euros to recapitalise its battered banks. The grim fate of NPRF also raised concerns about the viability of long-term capital: after all, sovereign wealth funds were billed as a provider of global financial stability as they invest in risky assets in the long-term.

from MacroScope:

Germany 1919, Greece 2010

Greece's decision to ask for help from its European Union partners and the International Monetary Fund has triggered a new wave of notes on where the country's debt crisis stands and what will happen next. For the most part, they have managed to avoid groan-inducing headlines referencing marathons, tragedies, Hellas having no fury or even Big Fat Greek Defaults.

Perhaps this is because the latest reports are pointed. They focus on the need to solve the Greek debt crisis before it spreads to bring down others and even shake Europe's monetary framework loose.

Barclays Capital reckons the 45 billion euros or so of aid Greece is being promised is a drop in the bucket and that twice that will be needed in a multi-year package. JPMorgan Asset Management, meanwhile, says that to bring its 130 percent debt to GDP ratio under control Greece will need the largest three-year fiscal adjustment in recent history.