Australia's JBWere sees opportunities in bonds, Asian shares

(Clarifies story first filed on Friday Nov.16 to state in opening paragraph that JBWere is a private wealth arm of NAB, not the only such business it owns)

FILE PHOTO: People walk past an electronic board showing stock information at a brokerage house in Hangzhou, Zhejiang province, China February 9, 2018. REUTERS/Stringer

SYDNEY (Reuters) - JBWere, a private wealth arm of National Australia Bank NAB.AX, sees value in battered Asian shares and is also scouting for opportunities to jump back into the U.S. fixed income market after going underweight for several years.

James Wright, chief investment officer at JBWere which counts high networth individuals and family offices among clients, told the Reuters Global Investment Outlook Summit that 2019 was expected to be a “challenging year” although U.S. equities still had some life left in them.

JBWere has about nearly A$55 billion ($40 billion) in funds under advice and about A$29 billion under management, as at end-September.

“I won’t be surprised to see this sort of cyclical strength in the U.S. economy continue a bit longer and surprise people,” Wright said on Friday.

The U.S. economy is expected to expand 2.5 percent next year, according to estimates from the Federal Reserve, after a brisk 3.5 percent rate in the third quarter. Growth in U.S. corporate profits is seen slowing to 10.8 percent in 2019 from 23.7 percent pace in 2018, according to global markets research at FTSE Russell.

“We’re clearly getting towards the end of this (bull) cycle and we are looking for that soft patch in growth but it wouldn’t surprise me if it’s further out than most people think.”

The Fed is widely forecast to jack up rates for a fourth time this year in December but Wright expects the central bank to become more cautious about future tightening, which will help support the economy and investment markets.

Just in October, world equities .MIWD00000PUS suffered their worst month since May 2012 as a rout in tech stocks, the Fed's signal to keep raising rates over the next year and escalating Sino-U.S. trade tensions roiled markets.

Fears about how Britain’s exit from the European Union might play out and the overall stability of the euro zone added to the overall uncertainty about the investment climate. That has altogether prompted many market players to call an end to the current bull run that began in 2009.

Yet, the growing headwinds for equities are expanding opportunities for investments in other asset classes.

“We think bond yields will continue to push up as the Fed tightens so we are starting to get little bit closer to the levels where we’ll probably reduce that underweight on bonds,” Wright said.

Wright is optimistic about Asia from a long-term perspective and is looking at allocating more money to the region.

On China specifically, he said JBWere was focussing on stocks that generated revenues from domestic Chinese consumption, rather than exports as a hedge against the trade war.

“Chinese authorities are doing a very good job of managing the slowdown in their economy. We continue to think their economy is going to be one of the best places to invest going forward. We are very optimistic on China.”

Reporting by Swati Pandey; Editing by Shri Navaratnam