LONDON, May 10, 2012 — The second annual BNY Mellon-sponsored survey conducted by the Economist Intelligence Unit (EIU) has found that almost half (47%) of respondents believe that we will see the exit from the euro zone of one or more peripheral countries in the next 12 months, and only 17% of survey respondents consider the EU among their top markets for asset price growth potential in the next 12 months. Meanwhile, the EIU identifies an oil price spike, tied in part to tensions over Iran’s nuclear programme, to be the main obstacle to global growth.
A survey of some 800 institutional investors and corporate executives drawn from 77 different countries, The Search for Growth: Opportunities and Risk for Institutional Investors in 2012 examines investor views about the prospects for growth across a range of asset classes, sectors and regions. According to the survey, global investors feel moderately optimistic about growth prospects over the next 12 months, in large part to the apparent stabilisation of the European debt markets, which is buying time for EU member states to engineer an economic recovery. But opinions among survey respondents and interviewees vary widely according to region – especially given the dramatically different growth prospects of emerging Asian and euro zone countries.
“The attitudes and perspectives of institutional investors globally, and how those sentiments are changing from year to year, are obviously a key focus for BNY Mellon. By combining the thorough quantitative analysis of the EIU with our own insights around where and how financial assets are moving and being allocated, we are able to better understand how organizations and businesses are thinking about risks and challenges in this post-crisis economy,” said James Palermo, vice-chairman and CEO of Global Client Management at BNY Mellon.
Speaking at Economist Conferences’ Bellwether Europe summit in London today, Cynthia Steer, Head of Manager Research and Investment Solutions at BNY Mellon Investment Management, discussed how south-south trade relations are redrawing the financial map of the world. “I believe we are on the verge of a revolutionary new chapter in emerging markets investing, as burgeoning trade relations between developing countries create a new South Silk Trade Route,” said Steer.
The EIU research found that, while investors appear buoyed by recent events, the fundamentals of the global economy have not improved significantly, and new risks have arisen to replace older ones. Following the stockmarket rally that opened 2012, the survey begs the question whether investors are pinning too much hope on what appears to be just a slight respite in financial markets. Survey responses indicate that investors believe the principal risks the market will face in 2012 relate to geopolitical events rather than strictly market-based developments.
Key findings from the report include the following:
Investors see some opportunities in global financial markets – among survey respondents, 85% perceive significant opportunities, although 51% acknowledge that there are major downside risks. The easing of the European debt crisis, coupled with a somewhat better economic performance in the US, has created a more stable outlook for financial markets – though this relief may prove to be short lived.
Geopolitics rather than market forces will govern the outcome in 2012 – hopes for further improvement hinge less on economic activity generated by the private sector than on governments’ ability to play their geopolitical roles properly. The Economist Intelligence Unit’s forecast still places the threat of an oil price spike, tied in part to tensions over Iran’s nuclear programme, as the main obstacle to global growth.
European investors are more optimistic than the global aggregate about the euro zone’s future – almost half (47%) of survey respondents agree that an austerity plan would be likely to collapse in one or more peripheral euro zone countries, prompting the exit of one or more in the next 12 months. But less than one-third (29%) of European investors think this scenario is likely.
Investor sentiment echoes grim forecast for the euro zone – only 17% of survey respondents consider the EU among their top markets for asset price growth potential in the next 12 months. More than 60% expect the euro itself to decrease in value—the worst projected performance for any currency covered in the survey and a dramatic turnabout from 2011, when 53% of respondents expected the euro to appreciate.
Low levels of capital investment temper opportunities – less than half (45%) of respondents think that businesses will increase capital investment in 2012. Respondents from the US, where the economy is slowly improving, appear slightly more optimistic, while the majority of eurozone-based respondents expect to see capital investment decrease or remain the same as in 2011.
Slower growth in China and India shifts attention to smaller emerging economies – smaller economies are likely to benefit from demographic trends as well as economic or political factors. Forty percent of respondents based in the euro zone consider South-east Asia as offering the best potential for asset price growth, the second most highly selected region or country.
Positive opportunities in the wings – over half (58%) of respondents say that a breakthrough in broadband technology that makes mobile computing more widely accessible is likely; and 66% say that this would have a positive impact on their portfolio.
A copy of the survey can be found at https://www.bnymellon.com/foresight/searchforgrowth.html
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $26.6 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.4 trillion per day. BNY Mellon (NYSE: BK) is the corporate brand of The Bank of New York Mellon Corporation. Additional information is available on www.bnymellon.com or follow us on Twitter @BNYMellon.
The Economist Intelligence Unit (EIU) is the world’s leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com or follow us on www.twitter.com/theeiu
The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.