Saying that the global economy continues to move in the right direction in spite of some U.S. gloom, Barclays Wealth issued recommendations on Wednesday that included buying equities, particularly in developed markets, and looking for Chinese stocks. It also suggested that now is the time to sell the Swiss franc and buy the Swedish krona.
In a report titled Barclays Wealth Compass, the company said that corporate profits would keep growing, making developed equities inexpensive, and that the global economic recovery should be able to withstand the rise in oil prices, with labor market improvements offsetting consumer distress over oil.
Its advice on Chinese equities stems from attractive equity valuations (according to the report, "the MSCI China's current price-to-earnings multiple of 11.6 times remains below its 5-year average of 13.5 times and below the MSCI Asia ex-Japan price-to-earnings multiple of 13.0 times").
And its currency suggestions, according to Kevin Gardiner, head of global investment strategy, stems from contrasts between the two countries. In a statement, he said, "The divergence between two non-euro economies—Sweden and Switzerland—gives rise to a stand-alone investment idea: namely, buying the krona and selling the franc." He added, "The Swedish economy continues to grow and interest rates are rising, while the overvalued Swiss franc is likely to dampen that country's economic growth and keep interest low."
Benjamin Yeo, head of research, economics and strategy, Asia, said in a statement, "In anticipation of lower inflation rates and a successful 5-year plan, we recommend both short-term and long-term investors accumulate Chinese stocks, especially on any market weakness. However, effective stock selection is key."
Strategic industries that are targeted by Barclays in the 5-year plan are:
- Energy saving and environmental protection (clean coal/natural gas, energy-efficient products)
- Alternative energy (bio-energy, solar, wind and nuclear power and related equipment)
- Alternative fuel cars (hybrid/electric/fuel cell car and related technologies)
- Advance materials (rare earth, high-performance materials/engineering plastics)
- New-generation IT (advanced software, microchips; cloud computing)
- Biotechnology (pharmaceutical drugs; medical equipment)
- High-end equipment manufacturing (aerospace equipment/aircraft; passenger trains).