DUBAI, July 11 (Xinhua) -- In the second half of 2012, equities from the Asia-Pacific, the MENA region and China and Russia are expected to outperform their counterparts in the developed world, the chief investment strategist at Dubai's Emirates NBD private banking division said Wednesday.
"On a global basis, our asset allocation models have been updated for July and show a deteriorating outlook for equities in developed markets and we thus recommend a slight over-weight in Emerging Markets," said Mark McFarland, the chief investment strategist said Wednesday in his weekly review.
Worries over the Euro zone debt crisis, despite some political progress, and deteriorating labor market data in the United States have made investments there less attractive, McFarland said.
Emirates NBD Private Banking's shift to emerging markets, on the other hand, comes despite their relatively high valuations.
"Equities outside the G7 are expensive relative to developed markets on a valuation basis but the momentum behind credit growth, the abundance of liquidity, earnings revisions and the slope of yield curves make for a more attractive investment proposition than developed markets," McFarland said.
Regarding an asset allocation by region, the investment expert added "the mix of emerging versus developed markets is still skewed in favor of emerging markets and Asia Pacific and Middle East and North Africa in particular. Earnings revisions are becoming more positive in equities with money supply growth rates still constructive."
In relation to the BRIC countries, "our picks in equities terms remain Russia and China amid attractive valuations and growth potentials," he said. McFarland, who made no secret of his preference of shares from China said further that "Russia's equity market has a beta of 1.3, meaning its downside risk aligned are more than proportionate to declines in the MSCI Emerging Markets index, but China comes with a beta of 1.0 by comparison, thus making it slightly less sensitive but with the prospect of significant cuts in Peoples' Bank of China monetary policy.
For shares listed in Shanghai and Hong Kong, the times to invest was now or never, added McFarland, explaining that "with inflation dropping in China to just above 2 percent in June, and purchasing managing index data appearing soft, the time for more sops to the market is now. For this reason alone, investors should consider investing long-term in the Chinese market."