Europe
It was a case of so near and yet so far for
Europe equity in January. Having being in neutral
territory for 17 consecutive surveys, they
inched closer to a thumbs up from managers,
moving up a solitary point to 24, two points
shy of a positive position.
The big story coming from Europe at the
moment – the Greek debt crisis and its concomitant
impact on the bond markets for
Spain, Portugal and Ireland – is no doubt
weighing heavily on the minds of many managers.
How the EU reacts could influence how
equities perform in the coming months.
Although sterling improved against the euro
(up 2.85%) its overall performance remains
historically low, as it has since last summer.
With the reality of low interest rates and lack of
inflation the same in both the UK and the eurozone,
it is unlikely that the currency situation
will be changing much in the near future.
Positive
Neutral
Negative
Positive
Neutral
Negative
The PA Manager Sentiment Survey is an overview of 26
of the biggest fund managers operating in the UK. Every
month, Skandia asks the managers what their forward
12-month outlook is on a series of asset classes and
sectors – they can answer positive, negative or neutral.
We consolidate all this information into a bespoke
database that shows how fund industry opinion changes
month by month – and we compare that to the monthly
discrete performance of the relevant index.
The bar charts show our sentiment number ranging
from +100 (all managers are bullish), through 0
(bulls and bears balance each other out) to -100 (all
managers are bearish). A score closer to zero generally
indicates a lack of willingness for managers to make
strong predictions. If the sentiment is -25 or lower,
then we count it as ‘bear’ and mark it red; if it is 25 or
higher then it counts as ‘bull’ and is coloured green. In
between, it is neutral and orange.
MANAGERS POLLED: Aberdeen, Aegon, Allianz Global Investors, Aviva
Investors, Axa Framlington, Barings, BlackRock, Credit Suisse, F&C,
Fidelity, Gartmore, Henderson Global, HSBC, Ignis, Invesco Perpetual,
Investec, JPMorgan, M&G, Martin Currie, Newton, Old Mutual, Schroders,
SWIP, GLG, Threadneedle (NB not all managers give a view in all sectors)
100
50
0
-50
-100
Feb ’09
100
50
0
-50
-100
Feb ’09
EUROPE EQUITY
STERLING PERFORMANCE vs EURO
32
16
0
-16
-32
Jan ’10
32
16
0
-16
-32
Jan ’10
FTSE World Eur ex UK (discrete) %
£ performance vs € %
Asia Pacific
While sterling performance
against the euro
and dollar continues to
be weak, the currency
climbed a more robust
5.9% against the yen in
January, while in sentiment
terms it has risen
for four consecutive months and had its best
score – 22, up six points – since April 2009.
Both Japan equity and Asia Pacific equity
also improved this month, up 20 points and
four points respectively. The index situation
was similar, with the FTSE All World Japan up
2.14% and FTSE World Asia Pacific ex Japan
climbing 6.28%.
As the global economic recovery becomes
more certain, Japan, one of the world’s largest
exporters, is set to benefit as other nations start
to buy its manufactured goods again. The
problem for the economy, however, is the
weak state of domestic demand.
Just as the BRIC nations are showing an
Positive
Neutral
Negative
100
50
0
-50
-100
Feb ’09
STERLING PERFORMANCE vs YEN
MANAGER SENTIMENT SURVEY
increasing enthusiasm to look for big trade
deals with each other (see Emerging Markets
on the opposite page), so Japan is finding its
Asian neighbours are willing to lap up its
exports. In December last year, for example,
China took over from the US as the country’s
biggest customer.
But it is not all one-way traffic. Japan has
been commodity-rich Australia’s biggest export
market since 1969, while Japanese companies
are increasingly tapping into the world’s largest
population and shifting manufacturing there,
creating jobs and driving consumer demand.
MARCH 2010 [www.portfolio-adviser.com] PORTFOLIO ADVISER
US
-32
Jan ’10
£ performance vs ¥ %
The Russell 2000 Index, the benchmark for US
small caps, was the strongest performer in
index terms in January, with a rise of 9.84%.
The news was not as good on the sentiment
front, with a slight fall of four points to ten.
As managers continue to give US equity
their support, the world’s largest economy is
still struggling under a wide range of problems.
Unemployment remains uncomfortably high,
the deficit has climbed to a jaw-dropping
$1.35trn (£861.63bn) while GDP shrank in 2009
by 2.4%. One of the few rays of light on the
horizon is the fact that the last quarter of 2009
saw strong growth of 5.7%, a six-year high.
The problem for the Obama administration
is the number of issues distracting its attention.
Afghanistan and Iraq provide headaches and
are a fiscal drain, the loss of its Senate majority
has made it more difficult for the Democrats to
push its agenda through Washington, while the
nascent Tea Party Movement is making unwelcome
headlines at home and abroad.
How resilient the US economy and government
is to these problems will no doubt influence
the performance of US equities in 2010
and in turn how managers feel about them.
32
16
0
-16
Positive
Neutral
Negative
Positive
Neutral
Negative
Positive
Neutral
Negative
Positive
Neutral
Negative
Positive
Neutral
Negative
100
50
0
-50
-100
Feb ’09
100
50
0
-50
-100
Feb ’09
100
50
0
-50
-100
Feb ’09
100
50
0
-50
-100
Feb ’09
100
50
0
-50
-100
Feb ’09
JAPAN EQUITY
ASIA PACIFIC EX JAPAN EQUITY
STERLING PERFORMANCE vs US DOLLAR
US EQUITY
US SMALLER COMPANIES EQUITY
32
16
0
-16
-32
Jan ’10
32
16
0
-16
-32
Jan ’10
32
16
0
-16
-32
Jan ’10
32
16
0
-16
-32
Jan ’10
32
16
0
-16
-32
Jan ’10
FTSE Japan (discrete) %
FTSE Wld AP ex Jap (discrete) %
£ performance vs $ %
S&P 500 (discrete) %
Russell 2000 (discrete) %
41
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