By Romesh Navaratnarajah: Encouraging developments in the global economy seen at the end of 2012 has offered a brighter outlook for this year, according to a report by Henderson Global Investors.
Reduced expectations over economic growth and company earnings could make way for pleasantly surprising results rather than disappointment. Also, "tepid expectations for economic growth should also permit central banks to continue with accommodative monetary policy", the report noted.
Another development has been the gradual improvement of some economic indicators since mid-2012, including consumer confidence in the US and purchasing manager surveys in China. This boosted global real money growth for 2H2012 which points to stronger economic data in the early part of this year.
"The big trend of 2013 could be a better environment for risk assets, such as equities. Companies have continued to repair their balance sheets, cash balances are strong and we would expect dividend payments to continue to rise. Companies are also likely to pursue share buybacks with excess cash, particularly in the US," said Bill McQuaker, Head of Multi-Asset, Henderson Global Investors.
Meanwhile, merger and acquisition activity is expected to remain below historical averages, as greater business confidence is necessary for its growth.
As for the recovery of equity markets, this depends on the extent of recovery of the global economy. A gentle recovery is favoured as this will permit equities to advance without unsettling bond markets.
"In summary, it is possible that 2013 is the year in which we see more convincing evidence of the global economy emerging from the financial crisis and moving into a different phase," added McQuaker. Romesh Navaratnarajah, Senior Editor of PropertyGuru, wrote this story. To contact him about this or other stories email email@example.com Related Stories: Singapore Asia's 8th most expensive city
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