Friday 19th January 2018
January 18th 2018: Mike van Dulken, head of research at Accendo Markets commented to clients this afternoon: “Equities are mixed around break-even as investors weigh up the first acceleration in China GDP since 2010, solid Industrial Production growth but poor Retail Sales. A mixed picture begs questions about, 1) Chinese data, and, 2) measures in place to carefully deflate a credit bubble. The FTSE underperforms, but Miners and Energy are positive, shrugging off GBP strength, suggesting appetite for risk over defensives, as commodity prices are buoyed by corresponding USD weakness. Data and corporate results remain in the driving seat driving ahead of month-end central bank updates (ECB/Fed). The UK FTSE underperforms, dragged lower by HSBC (profit taking, Carillion exposure), ABF (results), SHP (broker preference for Roche), a plethora of defensives (GBP strength, preference for risk) and a handful of ex-dividends. Limited help from Miners (metals up on USD weakness), Energy (Oil prices stable) and HL. Germany’s DAX if just offside, with losses for Utilities (hawkish ECB, exposed to higher rates) offsetting outsized gains for Tech, Autos and Insurance. The FTSE100 has broken below 7715. The DAX30 remains in 13140-13345 range. Dow Jones Futures continue to push for fresh highs above 26150. Gold is off its lows, nearing a test of yesterday's $1332 breakdown -

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Asset Allocation

The latest Brickvest Barometer, covering Q4 2017, which measures investor appetite in commercial property suggests the hunt for income ranks highest (38%) among respondents as their primary investment objective, up 6% from Q3 to 38%.

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Bank of America Merrill Lynch’s (BofAML’s) January fund manager survey finds equities the asset of choice for investors these days with the allocation to equities jumping to a two year high of net 55% overweight, while allocation to bonds falls to four-year lows of net 67% underweight. Investors are the most overweight equities relative to government bonds since August 2014. “Investors continue to favor equities,” says Michael Hartnett, chief investment strategist. “By the end of Q1, we expect peak positioning to combine with peak profits and policy to create a spike in volatility.”

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GSA, in partnership with Singapore’s sovereign wealth fund GIC has acquired four new student residences in Berlin, Hamburg and Frankfurt for €330m, tripling their student bed portfolio in the country.

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Global monetary policy has been extraordinarily accommodative for a decade, but an inflection point has clearly been reached. How can investors position their portfolios effectively in an era of unwinding QE? Higher interest rates and waning liquidity are the most significant global macro risks. By William W. Priest, chief executive, co-chief investment officer and portfolio manager, EPOCH Investment Partners.

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As soon as markets entered this latest bull run cycle, prophets of doom, or at least market corrections ahead have multiplied. How much longer can these levels be sustained: half a year, one year, two? At this time of year, when every seer of note comes to the fore, to give their particular ha’penny, it should come as no surprise that one or more market surveys will focus on an expected market correction.  At least seven out of 10 (71%) institutional investors in a new market survey anticipate a global equity market correction of more than 10% within 18 months, including nearly half (47%) who expect it to happen within a year. The results are included in a new research survey by Managing Partners Group, the international asset management group. Only 12% expect no correction at all.

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Berlin-based investment manager Catella Residential Investment Management GmbH (CRIM), a subsidiary of the Swedish Catella Group, and on behalf of Catella Wohnen Europa investment fund, CRIM has acquired a total of 234 residential units in Vienna and Rostock with leasable space of 8,634 m2under a mandate from a southern German utility.

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Hermes Investment Management (Hermes has launched the Hermes Impact Opportunities Strategy, managed by Tim Crockford, and supported by a team of four.

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Growing appetite for exotic emerging market debt, in the hunt for better yields, has helped make emerging markets’ debt issues, particularly sovereign issues, popular this year. Although emerging markets bonds have lost some of their lustre in recent weeks, primary market offerings from Indonesia, Panama’s Multibank, the Bahamas and a long dated (30 year) bond from Nigeria have been popular with investors, even as yields have fallen somewhat. Can the trend be continued into 2018?

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