December 5, 2011 / 12:16 PM / 6 years ago

Deutsche Private Wealth sees double digit equity gains in 2012

LONDON (Reuters) - Equity markets could rebound with double-digit gains next year, led by well-managed, large companies exposed to global growth which look more attractive than orthodox safe-haven assets, says Deutsche Bank Private Wealth Management.

Speaking at the Reuters 2012 Investment Outlook Summit on Monday, Arnaud de Servigny, Deutsche PWM’s global head of discretionary portfolio management and strategy, also said the euro would survive in one form or another as policymakers finally present a resolution to the two-year-old sovereign debt crisis.

That would provide more visibility to the market and could provide a catalyst for a rebound in risky assets across the board, he said.

“As soon as the political environment in Europe is more defined there could be a re-pricing taking place ... For 2012, what we believe generally is (there will be)double-digit growth in equity assets by the end of the year,” de Servigny said at the summit, held at the Reuters office in London.

“Large corporates have in place an environment that is quite well managed, quite flexible, quite reactive to the macro economic environment, and a level of transparency that is very high. It’s a good period for them because costs are kept under control.”

De Servigny reckons the euro will survive, although there was a possibility of some countries -- such as Greece or Portugal -- choosing to leave.

“I don’t see the breakup of the euro ... In 2012 people are going to find the menu of what is needed to be part of the euro zone. They will decide to opt in or opt out based on the menu they’re offered,” he said.

“There is going to be a set of prerequisites to be in Europe. During the second half of 2012 people might have a bit more visibility. That can give some sort of positive perspective for equity markets.”

Large multinational companies offer good alternatives for investors seeking safety as traditional safe-haven assets -- government bonds, cash and gold -- have become unattractive.

“If you think of the main safe asset traditionally it’s been sovereign bonds. With this crisis, it’s not very safe. Cash depends very much on the stability of the country. Cash is not safe like it used to be, ” de Servigny said.

“In order to preserve assets you need to be harnessed with entities that exhibit a level of governance that is rather strong and are also harnessed to a level of growth that is sufficient ... You want to have companies that are also quite well structured, well organized.”

Emerging markets -- which have underperformed their developed counterparts because of capital flight out of risky markets -- may rebound more strongly, although they are unlikely to lead a global recovery, he said.

Brazil’s economic growth is expected to slow to 4.5 percent next year, which may make it harder to deal with a domestic economic transition, while Eastern Europe has struggled because of its dependency on liquidity from European financial institutions.

As for China, growth has also slowed at a time when the country’s huge economic transition requires a very high level of expansion.

“It has really been helping a lot over the past years in terms of providing global growth. It’s still there ... (But) it’s going to be a bit more muted growth than it has been in the past,” De Servigny said.

“I believe that in 2012 it will really be for Europe to act and put things together in order to provide some stability. Asia, China are really going to be more of a receptacle for the stability that has been provided by the rest of the world.”

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