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Sun 20 Jun 2010 03:49 PM

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Top banker advises caution on emerging markets assets

It is time for investors to look at riskier assets, says Sarasin-Alpen chief.

Top banker advises caution on emerging markets assets
SOUND INVESTMENT: The Swiss banking group has a relatively cautious stance on emerging markets at the moment, Cooper said. (Getty Images)

The regional head of a Swiss banking group on Sunday said that he has started to advise his clients to consider investing away fromemerging markets despite current high demand for those types of assets.

“Interestingly, as an investment opportunity, we’re not recommending emerging markets at the moment,” Sarasin-Alpen & Partners managing director and senior executive officer Paul Cooper told Arabian Business.

“Ironically, the emerging world has been so strong economically that inflationary pressures are building and interest rates are beginning to rise. That is often taken as a negative by investors.”

Cooper said that the crisis in the developed world had led to a “permanent structural increase” in the demand for emerging market assets, particularly in light of the growing presence of China and India and their role in the global economy.

However, Cooper also said that cyclicality would remain and that he was currently advising clients to invest in firms in the developed world that are selling into emerging markets.

“These companies are often cheaper than those in the emerging markets now; they have good liquidity and good corporate governance, but they can tap into the economic growth and demand coming from the emerging world,” the Sarasin-Alpen chief said.

“There will be a time when we go back into the emerging markets, but at the moment, we have a relatively cautious stance on that.”

A survey released in May by asset management firm Invesco revealed that 82 percent of respondents in the GCC had forecast high exposure to emerging markets over the next three-to-five years, compared with 30 percent for North America and 14 percent for Europe.

The report added that the key driver for this assessment might simply be that GCC investors expected emerging market returns to exceed those in developed markets.

Cooper also said that it was time for investors to raise their risk profile and go back into riskier assets such as equities, although he admitted that it would take a little longer for his clients to feel the same way.

“It is the time to be increasing the risk profile of your portfolios. But it will take time, and I think cash or near-cash-type products will remain in demand for the near future,” he added.

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