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Investment strategies recommended by Erste for Q3

Lucia Maxim, 9 Jul 2009

Romanian version

The recovery of the equity markets in March was largely driven by excessive increases in investors’ risk aversion, but Erste Group analysts stress that even though equity markets have seen their bottom, the real economy is still in the search of its final low.

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Stock markets have used up most of their potential

The aggressive fiscal and monetary policy measures seem to have finally lifted the risk tolerance among investors around the globe. The VDAX, as a measure of general market nervousness, has also gradually returned to September levels, after posting an historic high on November 19, 2008, with nearly 200%.

The good equity market performance in March involved a significantly lower turnover, down 50% YoY, but rested on generally calmer volatility, Erste analysts say. But the argument of decreasing risk premiums lifting equities is losing steam and should have used up most of its potential already.

Moreover, specialists say that since the beginning of the year, cash is leaving low-yielding money market funds, looking for a new home in bond and equity markets. “Interestingly, fund flows are to some extent circumventing developed markets and focusing on emerging markets”, reads the Erste report.

Within global equity funds, emerging markets have already reached their historical weight again (9.6%).

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