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BNP-Paribas IP upgrades shares, cuts government bonds
[London] BNP Paribas Investment Partners is buying stocks and selling government bonds, arguing the recent slump in global equities and surge in high-rated bonds does not reflect economic conditions, the head of its tactical allocation team said on Thursday.
BNP Paribas IP, which manages assets worth 55 billion euros(70.26 billion US dollar), upgraded its tactical allocation on developed-market equities to "overweight" from "neutral" and downgraded government bonds to "underweight" from "neutral".
Worries about global growth and receding monetary stimulus have hit global equities, with the MSCI 45-country world index shedding almost 10 per cent in the last three weeks.
A search for assets perceived as safer pushed Germany's 10-year Bund yields to a record low on Thursday. Yields on US Treasuries and UK gilts also fell earlier this week. "(Equity) markets this time got oversold ... so we thought it would be a good time to start increasing our equity weight because we think our fundamental story hasn't changed," Colin Graham, the head of tactical asset allocation and chief investment officer of BNP Paribas Investment Partners'multi-asset team. "We're doing it gently because this selloff could last another week or two. We are not trying to time the bottom." Graham expects the US economy to grow in line with or above its long-term trend. Lower oil prices should help consumer spending.
He cut his economic forecasts for the euro zone but still expects an improvement in economic data into the end of the year, with inflation slowly troughing. "The only way to justify gilts, Bund and Treasuries at this level would be to see significant risk of global recession,"Graham said. "These are the levels we saw in 2008 and 2011. We don't think we are in that world at the moment." REUTERS