Economic Summary for the week ended 22nd June 2012

Spain - Spanish borrowing costs on 12 and 18-month bonds jumped to 5.1% at its first debt auction this week, since securing a EUR100bn ($126bn) bank bailout.

Madrid raised the intended EUR3.04bn but the interest rate payable rose from 3% at a similar debt sale on 14 May.

The government has denied that a more detailed independent audit of bank debts is to be delayed. The first audit, which will determine the size of bailout needed, is due to be published this week.

Japan - Japan's exports have risen the most in 17 months easing concerns about the impact of a global slowdown on the Japanese economy.

Exports rose 10% in May from a year earlier, boosted by a 38% increase in deliveries to the U.S. Shipments to China, Japan's biggest trading partner, also rose for the first time in eight months.

Japan's export-dependent economy relies heavily on demand from markets such as the U.S., Europe and China for growth.

India - Ratings agency Fitch has cut its outlook for the Indian economy to negative, saying the country's growth faces "heightened risks".

Fitch warned India's growth potential "will gradually deteriorate if further structural reforms are not hastened". It also added that the government had made little progress on reducing its deficit.

The downgrade comes just days after Standard & Poor's warned that India could lose its investment grade status. "India also faces structural challenges surrounding its investment climate in the form of corruption and inadequate economic reforms," Fitch said in a statement late on Monday.

Emerging Markets - Emerging economies may set up a joint 'anti-crisis' fund if they do not receive enough say in decision making at the International Monetary Fund (IMF) under proposed voting reforms, a senior Russian official said.

The leaders of BRIC nations (Brazil, Russia, India and China), pledged at the Group of 20 summit in Mexico to contribute $75bn to boost the IMF's lending power but had sought to tie the loans to voting reforms.

"It is clear that BRIC countries have entered the stage when they can demand to be reckoned with (in the course of the IMF reform)," Deputy Finance Minister Sergei Storchak told reporters.

The five BRICS nations represent 43% of the world's population and approximately 18% of global economic output.

China - China plans to lower the entry barrier for foreign institutional investors looking to buy publicly traded securities in mainland exchanges, as part of reforms to add depth to the country's capital markets.

The government will cut the minimum requirement on assets under management to $500mn from $5bn for companies seeking a license under the Qualified Foreign Institutional Investor program, the China Securities Regulatory Commission said.

The changes are "very positive," Mark McCombe, Asia- Pacific chairman of BlackRock Inc., the world's largest asset manager, said in Hong Kong. "I think the underlying objective is to get more investment into China."

Markets - Goldman Sachs Group Chief Executive Officer, Lloyd Blankfein, said the firm will rely on the biggest emerging markets for most of its growth even amid increasing concern economic expansion in Brazil, Russia, India and China may be slowing.

"80% of the growth of our business is going to come from high-growth areas identified as BRICs," Blankfein said at the St. Petersburg International Economic Forum in Russia on Thursday. "Our footprint will correlate with the ring of growth in various places around the world, providing they have good open markets."

Commodities - Oil tumbled below $80 per barrel for the first time in eight months this week as U.S. inventories surged amid concern that the European debt crisis will drag down the global economy, reducing fuel demand.

Futures dropped as much as 1.9% to $79.92 per barrel, the lowest intraday level since Oct. 6. Prices have slumped 27% from this year's settlement high as U.S. stockpiles rose to the most in almost 22 years and growth slowed in the U.S., Europe and China.

Spotlight on: the power of wealth shifting East

The number of millionaires in Asia has overtaken North America for the first time, in a sign of wealth shifting across the globe due to the economic downturn, according to a new report.

In the Asia-Pacific region there are now 3.37 million men and women with more than $1m in the bank, compared with 3.35 million in North America, Capgemini and RBC Wealth Management's latest world wealth report has revealed.

But the overall level of wealth in North America is still the highest in the world, with its millionaires, such as Warren Buffett and Bill Gates, controlling $11.4tn, while Asian businessmen control $10.7tn, although wealth levels declined twice as fast in North America as in Asia in 2011.

Millionaires in the U.S., Japan and Germany still make up more than half the world's richest, but total world wealth levels fell for the first time since the worst of the economic downturn in 2008.

In the U.K., which has the fifth highest number of millionaires, membership of the elite club dropped 2.9% from 454,300 to 441,300, while both Germany and France saw increases.

The world's wealthiest have $42tn at their disposal, down 1.7% on 2010, with all regions seeing a fall, except the oil-rich Middle East.

Jean Lassignardie, corporate vice president of Capgemini, said: "Europe will be top of mind for investors, as repeated flare-ups [in the eurozone] are likely to keep markets on edge. Additional drivers such as the economic performance in China, mature market headwinds, global political leadership changes and policy decisions will all play key roles in determining whether 2012 drives increases."

Several emerging markets saw wealth levels drop, in particular India and Hong Kong, which saw their number of millionaires fall by a fifth.

Researchers calculated millionaires as individuals who have the funds to invest at least $1m, and revealed that 9.9 million have between $1m and $5m.

This group grew slightly, 1.1%, but the richest section, with more than $30m at their disposal, dropped 2.5% to 100,000 people, with the value of their wealth also down nearly 5%.

The drop is linked to some of their holdings in higher-risk investments such as hedge funds, private equity and real estate.

India was worst hit due to "a slump in its equity-market capitalisation and its currency in 2011 as a lack of faith in the political process and the slow pace of domestic reformed disappointed investors," according to the report.

It added: "Also hard hit in 2011 were the millionaire populations of Singapore and Poland, which both suffered the direct effects of the eurozone crisis. Singapore saw a drop in exports, and Poland in foreign investment."

George Lewis, group head of RBC wealth management, explained: "The aggregate wealth of high net worth individuals declined overall, as market volatility took its toll.

"It is significant that for the first time this year there are now more high net worth individuals in Asia-Pacific than in any other region. However, losses in key markets such as Hong Kong and India meant that wealth contracted in Asia-Pacific overall."

Economic Summary for the week ended 15th June 2012

Global - Developing nations should brace themselves for weak growth and "tougher times", the World Bank has warned this week.

It said that there may be "a long period of volatility in the global economy" as the eurozone debt crisis escalates. The bank forecast that developing economies will grow by 5.3% this year, down from 6.1% in 2011.

It urged policymakers to take adequate long-term measures to ensure that they can sustain growth.

"Developing countries should focus on productivity-enhancing reforms and infrastructure investment instead of reacting to day-to-day changes in the international environment," said Hans Timmer, director of development prospects at the World Bank.

Japan - Japan's core machinery orders, a key indicator of capital expenditure, rose more than forecast in April in a positive sign for the economy.

The figures come amid fears that a slowing economy coupled with a strong yen might see manufacturers shift production overseas. However, analysts said the data showed that firms were confident about growth.

"The machinery orders are an early indicator of how the economy is doing, giving us an hint of investment trends," Martin Schulz of Fujitsu Research Institute in Tokyo said.

China - The International Monetary Fund (IMF) has flagged "significant downside risks" to China's growth outlook, but stands by Beijing's ability to support the world's second largest economy. Concluding its latest annual economic health check of the country, the IMF predicts that growth will moderate at about 8% this year, down from the 9.2% seen in 2011.

David Lipton, first deputy managing director of the IMF, says: "We support the authorities' ongoing effort to promote higher quality growth while at the same time fine-tune macroeconomic policies to help ensure that growth does not slow too much."

Emerging Markets - Emerging-market stocks rose this week, putting the benchmark index on course for its biggest weekly gain in four months, on speculation central banks will take steps to shelter economies from Europe's debt crisis.

"It looks like global central banks are already prepared for aid packages in case economies slow further and Greece's problem deteriorates," Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co., said.

Emerging-market funds lured inflows of $920m during the week ended June 13 after China cut interest rates and Spain asked euro-region governments over the weekend for as much as EUR100bn to help shore up its banking system.

Ratings - The credit ratings of Spain and Cyprus have been cut by rating agency Moody's. The move follows a EUR100bn ($126bn) bailout of Spain's banks by fellow eurozone countries agreed over the weekend. Cyprus is expected to seek its own bailout in the coming days.

Spain's government faces its highest borrowing costs in debt markets since joining the euro, as lenders fear for the country's future in the eurozone.

Spain's rating was cut three notches, from A3 to Baa3 - one notch above junk.

Cyprus' rating fell two notches, from Ba1 to Ba3, pushing it deeper into junk status.

Greece/Global - 10 million Greeks will vote on Sunday for a decision that may determine the fate of the world's first democracy and the future of the Euro.

The June 17 vote will determine whether Greeks, in a fifth year of recession, accept open-ended austerity to stay in the euro or reject the conditions of a bailout and risk the turmoil of becoming the first to exit the 17-member currency. World leaders have said they'd prefer a pro-euro result, underscoring concern over global repercussions.

"I want Greece to remain in the euro zone, but Greeks must understand that this requires a relationship of trust," French President Francois Hollande said. "If the impression is given that the Greeks want to distance themselves from their agreed commitments and to abandon every prospect of recovery, there will be countries in the euro zone that will prefer to terminate Greece's presence."

Commodities - The price of oil rose the most in more than two months on speculation the Federal Reserve will loosen monetary policy to spur growth and as OPEC (organisation of the Petroleum Exporting Countries) members were asked to cut production that exceeds their current output ceiling.

Oil advanced 1.6% as a worse-than-expected jobless claims report fuelled expectations that Fed policy makers will announce new stimulus measures next week. OPEC Secretary-General Abdalla El-Badri said the group's production is approximately 1.6 million barrels a day above the 30 million target renewed on Thursday.

Spotlight on: Investor trends & fighting inflation

Despite rising concerns about meeting investment goals, most investors are "stuck in place" with current portfolio allocations, according to findings released from the latest "Barometer" survey of investors and advisors conducted by BlackRock.

Only around one in 10 investors is making portfolio adjustments, as the results suggest uncertainty in the face of volatility is battling optimism about the future direction of the market.

While trying to manage the challenges of uncertain and volatile markets, many of the investors surveyed are also grappling with the profound financial management challenges of retirement planning.

Nearly half of investors, 46%, say they are considering a later retirement than they initially planned, up from 30%a year ago. Their advisors, polled in a separate survey, point to concerns about longevity of savings, severe loss of portfolio, and market volatility as the top three factors affecting retirement timing.

Of those surveyed, 62% of investors said they were optimistic about the market's performance over the next six months. Yet when asked to describe today's environment, investors are most likely (57%) to characterize conditions as "uncertain," and only 15% described the markets as full of opportunity.

As a result, investors are sticking with their current portfolio allocations, with nearly half, 46%, making no changes. The percentage of investors adjusting portfolios has dipped from 21% six months ago, to 11% today.

Investors are uncertain not just about the markets generally, but also about how specifically to deploy their money. The number one reason investors are holding onto cash, according to the survey, is "uncertainty about where to invest" followed by a belief that it's a poor investing environment and fear of losing money.

"Uncertainty is often a crippling factor when it comes to investing and all too often, when uncertain, investors do nothing at all," Mr. Porcelli commented. "However, many investors don't realize that when you factor in inflation, staying in cash can lead to a deccumulation of assets rather than accumulation of assets over time."

56% of advisors and 67% of investors said that while they consider the impact of inflation on their savings, they are not focused on it. However, most advisors (87%) anticipate inflation will increase over time.

"Inflation risk is the danger that an investor's portfolio returns will not keep pace with inflation, eroding the purchasing power of income over time," added Mr. Porcelli. "Inflation is harder to notice on a one, two, or three-year basis, but our research has shown that inflation of just 3% can reduce the purchasing power of a portfolio by 50% over a 25-year time frame."

*BlackRock's "Barometer" research is conducted online, two times per year, with support from research firm Market Strategies International. For the latest wave of the research, conducted from April 23 to May 7, 353 investors and 377 financial advisors were polled. All of the investors surveyed work with financial advisors, and 93% are age 56 or above, reflecting a general focus on investors in their peak wealth accumulation phase and dealing with the potential or actual financial management implications of retirement. All those surveyed had $250K or more in investable assets.

Economic Summary for the week ended 1st June 2012

Brazil - Brazil is on the brink of a "historic" shift towards a lower interest rate regime that will change the foundations of the country's financial and investment industries, says the head of its stock exchange.

Interest rates in Brazil were reduced to record lows on Thursday, being cut by 50 basis points to 8.5%. It is thought that Brazilian savers and investors are likely to start moving from simple deposit accounts and bonds to other more sophisticated forms of investment, including equities.

"Brazil's savings culture is one of inflation and fixed-income investments. This may change it all," Edemir Pinto, chief executive of BM&FBovespa, one of the world's largest exchange companies by market capitalisation, told the Financial Times.

India - The Indian economy grew at the slowest rate since 2003 in the first three months of 2012, due to a widening trade gap and poor investment.

India's gross domestic product (GDP) rose 5.3% in the first three months of 2012, down from 7.8% in the same period last year, official figures show. The growth figure was well below market expectations of 6.1%.

India is the third-largest economy in Asia but has been struggling with inflation and currency weakness.

Philippines - The Philippine economy beat expectations and expanded by 6.4% in the first quarter to become one of east Asia's top performers, boosted by services such as tourism and business outsourcing, as well as consumer and government spending.

Analysts had been pessimistic as exports, which make up around 35% of economic output, had begun to slip in March. With demand from Europe and Asia slowing, they had projected growth in the first three months of the year of around 4.5%.

Instead, the country posted the highest first-quarter economic growth in east Asia except China, said Arsenio Balisacan, the Philippines' economic planning chief.

U.S. - The number of Americans applying for unemployment insurance payments rose last week to a one-month high, a sign that progress in reducing joblessness may be stalling.

First-time claims for jobless benefits increased by 10,000 to 383,000 in the week ended May 26 from a revised 373,000 the prior week, the Labour Department said on Thursday.

Increased firings weaken the prospects for accelerating job growth, which in turn could weigh on consumer spending, the biggest part of the economy.

Germany - Germany's unemployment rate slid to a new two-decade low in May, bucking a Europe-wide trend as the financial crisis continues.

The jobless rate declined to 6.7% from 6.8% in April after revisions, the Federal Labour Agency in Nuremberg said on Thursday. The number of people out of work was unchanged at 2.87 million.

Spain - Madrid was dealt a double blow on Thursday after it emerged that almost EUR100bn in capital had left the country in the first three months of the year and the head of the European Central Bank criticized its handling of Bankia, the troubled Spanish lender.

Data published by Spain's central bank showed EUR97bn had been pulled out in the first quarter (around a 10th of the country's GDP) as concerns mounted over Madrid's ability to contain its economic and financial crises, which have forced government borrowing costs to euro-era highs.

Commodities - Gold is poised for the worst run of monthly losses in more than 11 years as concern that Europe's fiscal crisis is escalating drove investors to seek the dollar as a haven over the precious metal.

Bullion is 6.1% lower in May for its biggest drop this year as the dollar rallied 5.1% against a six-currency basket including the euro.

Sectors - Luxury stocks have outperformed over the last six years despite the global financial crisis, figures from S&P Indices show.

The S&P Global Luxury Index delivered annualised returns of 9.3% in the six years to March 31, against the 6.2% per annum seen in the S&P Global Broad Market Index and the 4.9% in the S&P Global BMI Consumer Discretionary Index.

Liyu Zheng, research director at S&P Indices, said "The drivers of the index and its constituent stocks are increased demand for luxury goods and services, especially from emerging markets and the rapid expansion of retail networks in high potential markets."

Consumer demand in the Asia Pacific region was cited as the main driver of the index's outperformance. Although just 4.2% of the index's constituents are based in Asia, more than half have significant exposure to the region.

Trends - Goldman Sachs has identified four countries that will drive global growth over the coming decade alongside the so-called Bric nations of Brazil, Russia, India and China.

The bank, which gave the investment world the concept of Bric ten years, says Mexico, South Korea, Turkey and Indonesia will be among the fastest growing countries of the next decade.

Katie Koch, from the office of the chairman at Goldman Sachs Asset Management, told the Morningstar Investment Conference 2012 that to label these eight nations as emerging markets is "quite insulting".

According to Goldman Sachs, these eight markets will be the top contributors to global growth over the next ten years. The smallest contributor of these eight, Turkey, is expected to contribute the same amount to global growth as the UK over this period.

Spotlight on: A shift to the East

East Asia is a region that is getting noticed. At the World Economic Forum in Bangkok over the next two days, the main topics of discussion will be how best to develop its opportunities and tackle its problems.

But can the region really help offset the slowdown that has hit the U.S. and Europe,and can it get the global economy motoring again?

While East Asia may not be the best-known of global regions, it contains a mix of established powerhouses, such as China, and so-called 'frontier' destinations such as Indonesia, Thailand, Vietnam, Singapore and the Philippines.

With the U.S. and Europe stuck in a period of slow growth and recession, East Asia is becoming increasingly important, not just to local companies but also the global economy.

"It is the rise of the East that is driving the fundament shift in the world's centre of economic gravity," says Pushan Dutt, a professor of economics at business school Insead. "East Asian economies are starting to have a much bigger share of global GDP, they are key to the global production chain and a large chunk of the world's population lives here."

According to the World Bank, the developing East Asia region, which includes China, grew by 8.2% in 2011.

Even if you exclude China, the world's second-largest economy, the region's growth rate was still a healthy 4.2% and it is forecast to expand by 5.2% in the current year.

One of the key factors helping growth has been increasing domestic demand and coverage. As the economies have grown, so have income levels, giving more spending power to consumers.

East Asia has also benefited from growth in the size of the working-age population.

Not only has that ensured a steady supply of labour, it also means that more people have been earning money, which they have been either saving or spending, helping underpin growth in their respective economies.

Growing domestic consumption has also helped offset a slowdown in exports from the region after demand from key markets such as the U.S. and Europe slowed.

Analysts say that East Asian consumers are likely to play an increasingly bigger role in global growth. "Currently the world suffers from a lack of demand," says Mr Dutt of Insead. "The U.S. and Europe are not consuming enough and you need an alternate source of demand, for which East Asia is a potential candidate."

The other main factor behind East Asia's expansion has been the rise in investment, both domestic and foreign.

Many of the region's economies are at a developing stage, which means that governments in those countries have been allocating resources and funds to improve infrastructure.

"Within the region, there is a huge demand for investment, especially in infrastructure, but also in areas such as sanitation, clear drinking water and housing," says Prakriti Sofat, an economist with Barclays Capital.

In its latest report on the region, the World Bank noted that higher investment, particularly in infrastructure, "offers the potential to sustain growth" in the region.

At the same time, the region has also become the destination of choice for foreign investors.

Emerging economies in East Asia accounted for 43% of all foreign direct investment in developing areas globally last year.

Yet while there are a lot of positives, the region is not immune from problems. There is no doubt that a slowdown in China, which comprises 80% of developing East Asia's GDP, would significantly damage the region's prospects.

However, some analysts also believe that if the slowdown in China is a gradual one, then it might in fact be beneficial for the other economies of East Asia.

With China consuming less, commodity prices would drop, putting a cap on inflation and freeing up money for development projects and spending, says Ruchir Sharma, managing director of Morgan Stanley and the author of Breakout Nations.

He adds that with manufacturing costs also rising in China, other nations may be able to start ramping up their own manufacturing operations. "As costs in China go up, manufacturing could be moving more to places such as Indonesia, Philippines and Thailand," he explains.

A shift of manufacturing would most likely be accompanied by increased investment and job creation, which in turn would help stoke consumer demand and spending.

Economic Summary for the week ended 25th May 2012

Europe - Markets across Europe set new lows for 2012 on Wednesday after countries were told by Brussels to prepare contingency plans for a Greek exit. The message from European Union (E.U.) officials knocked shares across Europe, with the major markets all posting losses.

The FTSE 100 closed down 2.5%, its lowest finish so far in 2012, while the German Dax lost 2.3%, and the French Cac 40 closed 2.62% down.

The U.S. provided a little stability for investors, with the S&P 500 closing up 0.17%, while the Dow Jones edged down slightly by 0.05%. The Nasdaq rose 0.39%.

Spain - Spain can't continue much longer with its current high borrowing rates, its prime minister warned on Wednesday as he urged a joint European response to keep the region's debt problems from getting worse.

Spain's borrowing rates are high, and rising, because of fears that its government finances might be overwhelmed by the costs of rescuing its ailing banking sector. High borrowing rates are at the heart of Europe's crisis and have already caused Greece, Ireland and Portugal to need bailouts.

U.K. - The U.K. economy shrank more than initially estimated in the first quarter after construction was revised to show a deeper slump, which may bolster the case for the Bank of England to restart bond purchases.

GDP fell 0.3%, compared with a 0.2% decline estimated last month, the Office for National Statistics said. Construction output fell 4.8%, the most in three years and more than the 3% initially estimated, while services and production were unrevised.

China - China has said it will take measures to boost demand and investment amid fears of a slowdown in its economy. On Wednesday, the government said it will encourage private investment in sectors such as energy, railways and telecommunications.

The move comes as its export sector, one of the biggest drivers of growth, has been hurt by falling global demand.

China's central bank has cut the reserve ratio requirement, the amount of money that banks need to hold in reserves, three times in the past six months. It is thought that the central bank may further reduce the reserve requirements for banks in the coming months as well as cut interest rates.

East Asia - The eurozone debt crisis could harm the growth of East Asian economies, the World Bank has warned.

The bank said that a "serious disruption" in the eurozone could hurt growth and dent demand for exports from East Asia. It said that East Asian countries need to boost domestic demand to re-balance their economies and sustain growth.

The bank warned that a faster than expected slowdown in China was also a threat to the region's growth.

"A slowing China, which comprises 80% of developing East Asia's GDP is a drag on growth across much of the region given China's growing role as an export destination and source of foreign investment," the bank said in its latest report.

Japan - Japan's credit rating has been downgraded by two levels by rating agency Fitch on concerns about the country's high levels of debt.

Fitch cut Japan's rating to A+ from AA and warned that further downgrades were possible.

Japan has by far the highest debt to GDP ratio of any major economy, although much of this debt is held by domestic investors.

"[Japan's] fiscal consolidation plan looks leisurely relative even to other fiscally-challenged high-income countries, and implementation is subject to political risk." Fitch said.

Companies - Prada Ltd, the Italian fashion company that owns the Miu Miu and Church's brands, plans to add 260 stores in the next three years to tap demand in emerging markets including Brazil, China and Persian Gulf countries.

Demand for Prada leather goods and other items is rising even as China's economic growth slows and Europe's debt crisis weighs on consumer spending. The company is benefiting from increasingly wealthy Chinese tourists who are fuelling growth in Europe as it also targets markets in the Middle East.

"We are expanding in Morocco, Istanbul, Beirut, Dubai and Qatar," CEO Patrizio Bertelli said. "Brazil is also a big market we're looking at."

Commodities - Gold gained for the first time in four days in New York as central banks increased their holdings and the U.S. dollar declined.

Central banks continued to buy bullion in April as Turkey raised its reserves by 29.7 metric tons and Ukraine, Mexico and Kazakhstan also increased their holdings, IMF data shows.

"We regard the central banks as a stabilizing element on the gold market and anticipate increasing buying of gold if its price should fall towards the USD1,500 per ounce mark," Commerzbank AG said in a report on Thursday.

Spotlight on: Fears of China's supposed property bubble

The booming Chinese property sector has long been a central point to analysts' speculation as to whether the second largest global economy is heading for a hard or soft landing, if at all.

As recently as March, China's property sector was attracting increasingly nervous attention from fund managers, 14% of which cited it as the riskiest sector for asset allocators (according to a Bank of America Merrill Lynch fund manager survey).

Mark Martyrossian, a founding partner at Tiburon Partners (a fund management business offering UCIT compliant funds with an Asian bias), has dismissed these views of the real estate market as "sour grapes", with western investors voicing discontent more out of sour grapes than calculated honesty.

He says: "I think the western view of Chinese property is misguided. We have messed up our economies in much part by lending too much money to people who can't pay it back and that has partly been in property, sub-prime [having been] the poster child. I think a lot of people look across at China and they feel we've messed it up and I think they are going to mess it up as well.

"Look at the fundamentals; luxury residency is a tiny part of the Chinese property market as a whole, [between 6% and 7%] but it makes better headlines to talk about ten million dollar luxury residentials in Shanghai than it does it to talk about 10m 500sq/f boxes of social housing that is being churned out in China and has been for the last couple of years."

Martyrossian says the primary difference between a property bubble, such as the sub-prime mortgage crisis or the Japanese real estate collapse in the nineties and the Chinese situation is the presence of debt.

"Do I lose sleep over the Chinese property market posing a systemic risk to the economy as in Japan in the eighties or sub-prime in the late nineties?" he asks.

"No, because it's not built on debt. Property bubbles are dangerous when they are built on debt. Prices may come down."

Schroders' Jim Rehlaender has made a similar case in recent weeks, arguing that markets have "unique structural factors offering it strong support."

China's National Bureau of Statistics confirmed that investment in real estate development in the first quarter was over CNY1tn , representing year-on-year growth of 23.5% but four percentage points lower than in 2011.

Rehlaender, who co-manages the GBP596.9m Schroders Global Property Securities with Al Otero, concedes that the Chinese housing market is viewed with "anxiety" but points out that unique structural factors offer it strong support.

However, Rehlaender says: "People also forget when looking at China that it is unlike any market in the world in that the government never relinquishes ownership of the land.

"In the case of a developer who can't perform, the government takes, or refunds the land premium, and the land could be retained or 'sold' later to another developer."

The manager, who holds 3.5% of his portfolio in emerging markets such as China, also points out that higher-quality property companies, such as China Overseas Land and Investment, have seen "solid" home sales and improving margins.

Rehlaender adds that investors should be prepared to see some bankruptcies by companies among the 85,000 residential developers that cannot complete their projects.

But he concludes: "Although we understand the concerns that have been raised about the Chinese residential market, we believe that we are past the crisis point".

Economic Summary for the week ended 10th May 2012

China - China has reported a trade surplus that is almost double industry expectations as domestic demand slows.

Exports climbed by 4.9percent, while imports grew by just 0.4percent, down from the 5.3percent growth recorded in March. The latest results represent the second consecutive month whereby a surplus has been reported, following a deficit of USD31.5bn in February.

The results will renew concerns that China's domestic economy is not responding to government attempts to stimulate demand after it cited this as a priority earlier this year.

Russia - Russia's central bank refrained from cutting interest rates for a fifth month, signalling reluctance to deploy monetary stimulus to bolster growth as it focuses on containing inflation.

Bank Rossii in Moscow left the refinancing rate at 8percent, the central bank said in a statement on Thursday.

The world's largest energy exporter cut inflation below Italy's rate for the first time in March and reduced it further last month as some food prices fell. Vladimir Putin, sworn in for his third term as president on May 7, battled inflation during his first eight years in the Kremlin after the rate peaked at 127percent in July 1999.

U.S. - The U.S. trade deficit widened at its fastest rate for 10 months in March. Official figures from the Commerce Department show the deficit at USD51.8bn in March, up from USD45.4bn in February.

Rising imports of oil, cars, mobile phones and clothing contributed to a 5.2percent rise in exports to USD238.6bn, which more than cancelled out a 2.9percent rise in exports to USD168.6bn.

Exports to Europe hit a record high, despite the eurozone debt crisis.

Greece - The eurozone's rescue fund has decided to hold back EUR1bn (USD1.3bn) of the latest instalment of its bailout to Greece.

This comes after a majority of Greeks voted against the political parties that supported the country's bailouts and the austerity they have imposed. As with previous disbursements to Greece, the European Financial Stability Fund (EFSF) will transfer the EUR4.2 into a segregated account which will be used for debt service payments.

The uncertainty of whether Greece might leave the eurozone has spooked investors and angered European officials, who want Greece to stick to the austerity cuts previously agreed.

Greece is due EUR39.4bn of its EUR110bn bailout before the end of June.

Germany - German exports grew for the third month in a row in March, with goods worth EUR98.9bn (USD128bn) exported.

German firms had the most success in markets outside the European Union (E.U.), where they recorded growth of 6.1percent compared with the year before.

"The German economy is profiting from the revival of world trade," said Ulrike Rondorf of Commerzbank. "Demand from the U.S. has increased and from Asia too. As German companies are very competitive they are especially well placed to profit from this."

Portugal - Portugal has angered its' locals with the decision to scrap four of its 14 public holidays. Two religious festivals and two other public holidays will be suspended for five years from 2013.

The country agreed a EUR78bn bailout deal with the E.U., European Central Bank (ECB) and International Monetary Fund (IMF) last year and recently passed the latest review of its spending cuts. It is hoped the suspension of the public holidays will improve competitiveness and boost economic activity.

Commodities - Goldman Sachs Group Inc. stood by its forecast for a rally in gold this year, saying that the precious metal will advance to USD1,840 an ounce over six months as the U.S. central bank embarks on a third round of stimulus in June.

The precious metal remains the "currency of last resort," according to analysts led by Jeffrey Currie in a report issued on Wednesday, the same day that gold sank to the lowest level in four months as Europe's debt crisis boosted the dollar. The forecast implies a 15percent surge.

Spotlight on: Investor sentiment for the next 12 months

The second annual BNY Mellon-sponsored survey conducted by the Economist Intelligence Unit (EIU) has found that almost half (47percent) 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 17percent of survey respondents consider the E.U. 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 2012examines 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 E.U. 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.

Speaking at Economist Conferences' Bellwether Europe summit in London on Thursday, 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 stock market 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.

Some of the key findings from the report include the following:

Investors see some opportunities in global financial markets - among survey respondents, 85percent perceive significant opportunities, although 51percent acknowledge that there are major downside risks. The easing of the European debt crisis, coupled with a somewhat better economic performance in the U.S., 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 (47percent) 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 (29percent) of European investors think this scenario is likely.

Investor sentiment echoes grim forecast for the euro zone - only 17percent of survey respondents consider the E.U. among their top markets for asset price growth potential in the next 12 months. More than 60percent 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 53percent of respondents expected the euro to appreciate.

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. 40percent 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.

Economic Summary for the week ended 3rd May 2012

U.S. - The Dow Jones index in New York closed at its highest level for more than four years on Wednesday after data showed U.S. manufacturing was stronger than expected in April. The Institute for Supply Management (ISM) said its index of manufacturing activity rose to 54.8 last month from 53.4 in March (a figure above 50 indicates expansion).

The Dow rose 66 points to finish the session at 13,279, its highest since 28 December 2007. The index has been rising steadily since sinking below the 7,000 mark at the beginning of 2009, and broke back above 13,000 in February this year.

China - Chinese and Russian co-operation in the energy sector will expand beyond the traditional Oil and Gas arena as economic ties between the 2 countries continue to tighten, industry experts say.

Russia exported a total of 7.17mn tons of Crude Oil worth USD2.06bn to China in the first 3 months of this year, an 81.4percent increase from the same period last year.

The Oil and Gas sectors make up more than 20percent of Russia's GDP, while China, the World's 2nd-largest economy and Crude Oil consumer, depends heavily on imports of foreign Crude Oil, more than 55percent, to support its economic growth.

China - China's manufacturing activity has expanded for the fifth month in a row, easing concerns about a sharp slowdown in the world's second-largest economy.

The official Purchasing Manager's Index (PMI) rose to 53.3 in April from 53.1 in March, the statistics bureau said. "The message is that Chinese manufacturing is growing, not as fast as in years past but faster than in the fourth quarter last year and enough to achieve the government's growth target for the year," said Dariusz Kowalczyk of Credit Agricole CIB.

India - Indian exports fell in March for the first time in two and a half years as Europe's debt crisis and slower Chinese growth hurt demand.

Merchandise shipments dropped 5.7percent from a year earlier to USD28.7bn, the government said in a statement on Tuesday. Imports rose 24.3percent to USD42.6bn, leaving a trade deficit of USD13.9bn.

"The fragile global economy doesn't augur well for Indian exports," Rupa Rege Nitsure, an economist at state-owned Bank of Baroda in Mumbai, said before the report. "The widening trade deficit and slowing economic growth pose significant risks to India's macroeconomic stability."

Spain - The Spanish economy is officially in recession, according to the latest figures. The National Statistics Institute said the economy shrank 0.3percent over the three months to the end of March, the second consecutive quarterly contraction, although the contraction was not quite as much as economists had been expecting.

Concern over the weakness of the economy and the deficit has driven up the cost of borrowing for Spain, raising fears it will need a bailout.

Japan - The Bank of Japan (BOJ) has increased its stimulus programme for the second time in just over two months in a bid boost the country's economic growth. The central bank said it would expand its purchase of Japanese government bonds by JPY10tn (USD123bn).

The move comes as Japan's economy continues to struggle amid a slowdown in key export markets such as the U.S. and eurozone and weak domestic demand. The BOJ also left its key interest rate unchanged between zero and 0.1percent.

Commodities - Gold declined for a third day in New York on Wednesday, on speculation economic growth will reduce the need for the Federal Reserve to add to stimulus measures.

Three voting members of the Federal Open Market Committee said they don't see a need to ease policy further as the economy maintains its expansion. Gold-backed exchange-traded products fell to a three-month low after prices reached a two- week high on Tuesday. Gold imports by India plunged to 30 to 35 metric tons in April from 90 tons a year earlier, the Bombay Bullion Association said.

Spotlight on: the appeal of equity income funds

In an environment of relative low, or at best 'volatile' growth, some fund advisers turn to investment funds that concentrate less on picking stocks that are set to achieve stellar outperformance, and instead look to those stocks that are likely to pay a regular, reliable dividend.

In most cases, it is the larger market leaders of the various sectors that continue to pay reasonable dividends, with small-mid cap stocks instead focussing on establishing market share through gradual growth. Of course, in addition to the attraction of dividend yield, it is the established industry leaders that provide peace of mind and a history of longevity for investors to take faith in during such uncertain times.

It is the proven ability of these companies to weather economic storms that fund managers call upon when choosing stocks for the best equity income funds.

Richard Turnill, manager of the underlying asset to the new Hansard BlackRock Global Equity Income fund (MX56 in HEL, MC146 in HIL) appreciates the current economic mood, but insists that there are still plenty of opportunities for growth.

The continuing euro crisis, fiscal tightening in the G7 nations, profit margins at peak levels and a modest policy response from China are among the key factors responsible for the poor outlook, Turnill says.

"We are in a process of longer-term structural shifts in the global economy. This has been well known by the market for the last few years," he added. "We continue to believe that high growth rates in emerging markets will be counteracted by much slower growth in the highly indebted developed markets."

Turnill co-manages the Blackrock Global Income fund with Stuart Reeve and together they look to exploit the trend for dividend growth in overseas companies.

Blackrock Global Income is set to pass its first anniversary in May. Its six-month return of 4.97percent puts it in the top quartile of the IMA Global Equity Income sector.

Commenting on the fund's performance, Turnill said: "From a sector perspective, telecommunication services, in which we are overweight, and consumer discretionary, which we are underweight in, drove underperformance. Royal Dutch Shell detracted, despite the rising oil prices, as lower gas prices affected earnings and the company was sued over the spillage."

"On the other hand, the Swedish company Svenska Handelsbanken was a top contributor to the fund's performance as the bank reported an increase in earnings and the banking sector in general bounced back during the period."

Turnill added that in the current environment global equities have performed well and continue to look attractive, especially compared with bonds.

"Equity markets generated modestly positive returns in March and strong returns more broadly over the quarter. This was driven by US economic data which continued to improve in the first quarter and global central banks supported the market with further liquidity measures. This gave equities strong returns for the start of the year," he said.

"Stocks continued to climb a wall of worry; major concerns include Europe flirting with recession, the eurozone continuing to struggle with a debt crisis, a growth slowdown in China and elections looming globally. Over the quarter market leadership rotated away from higher Beta names; companies with strong fundamentals led by the end of March."

Economic Summary for the Week ended 25th April 2012

U.K. - The U.K. is officially back in recession as preliminary figures show the economy contracted 0.2percent in Q1.

The Office for National Statistics (ONS) confirmed GDP contracted in the first quarter in preliminary figures, which, following the previous quarter's contraction of 0.3percent, means the U.K. is considered to be in recession.

The figures confirm analysts' fears of a double-dip recession. The U.K. was last in recession in 2009 and, despite a strong 2010, has failed to recover in the way many had hoped. The ONS said the economy has shown no growth over the past year and has recovered less than half the output lost during the recession in 2008 and 2009.

Europe - A survey of eurozone banks has allayed fears that a credit crunch in the eurozone may be underway. Only a net 9percent of 131 banks tightened their lending conditions in the last three months, according to the European Central Bank's latest quarterly survey.

The data suggests that emergency loans provided by the ECB have helped stave off a sudden curtailment of lending. But ECB President Mario Draghi said that the outlook for the eurozone economy this year remained weak "Available indicators for the first quarter of 2012 broadly confirm a stabilisation in economic activity at a low level," he said.

Mr Draghi also warned that, despite the greater readiness of banks to lend, the demand for loans from businesses was likely to remain subdued.

Spain - Budget Minister Cristobal Montoro said Spain would damage European and global growth if it misses budget-deficit targets and threatened to take over the accounts of regions that don't reorder their finances.

"Spain's future and Europe's future are at stake because we are big enough to hurt the whole of Europe and to threaten the global economic recovery," Montoro told lawmakers in Madrid. The government will take all measures needed because "for all parts of the administration the deficit target is unconditional," he said.

"We have no reason to doubt the absolute commitment of the Spanish government to undertake the necessary reforms," European Central Bank President Mario Draghi told a European Parliament committee in Brussels. "Remarkable progress has been achieved and is being achieved."

India - India's sovereign credit outlook has been lowered to negative from stable by Standard & Poor's (S&P) on risks of slower economic growth and a widening current-account deficit, taking the nation a step closer to junk status.

"India's investment and economic growth have slowed, and its current-account deficit has widened," S&P said in a statement, reaffirming its BBB- long-term India rating, the lowest investment grade. "We are revising the outlook on the long-term ratings on India to negative to reflect at least a one-in-three likelihood of a downgrade."

Bonds fell, stocks declined and the rupee pared gains after S&P said India's rating could be lowered because of diminishing growth prospects, a deterioration in trade performance or slow progress on fiscal reforms. The Indian government has the widest budget deficit among the largest emerging economies, while the current-account shortfall reached an unprecedented USD19.6bn in the three months through December.

U.S. - U.S. companies from Apple Inc. to 3M co. are surpassing earnings estimates at the highest rate in two years as economic growth at home helps drive demand and counter a drag from Europe.

"The domestic economy is faring far better than people thought and that, even in the face of Europe and the slowdown in the emerging world, is blowing away estimates," said Jim Paulsen, chief investment strategist for Well Capital Management, which oversees approximately USD333bn.

Profits running ahead of forecasts may help ease investor concern that a shrinking economy in Europe and slower growth in China will weigh down earnings this year.

China - China's stocks rose for the third time in four days after Premier Wen Jiabao pledged to maintain steady economic growth and U.S. housing data bolstered the outlook for exports to the world's biggest economy.

"The government has the tools to stem a decline in economic growth and they will act when the situation worsens," said Li Jun, a strategist at Central China Securities Co. in Shanghai. "Earnings are still a major concern and will limit a rebound. Trading will be range-bound for the time being."

The Shanghai index has climbed 9.4percent this year amid speculation the government will take measures to boost the economy. "China has confidence that it will sustain steady and robust economic growth," Wen said "We will remain committed to reform and opening up."

Commodities - Gold fell to USD1,623.55 an ounce on Wednesday, the lowest level since April 5, on concern the political climate in France and the Netherlands may complicate Europe's struggle to contain the debt crisis. The Akshaya Tritiya festival, considered an auspicious day to buy precious metals, is celebrated today in India, last year's biggest bullion buyer.

"India's jewellery demand or physical interest from the world's top buyer is very slack in spite of the Akshaya Tritiya festival this week, which is a concern," Andrey Kryuchenkov, an analyst at VTB Capital in London, said on Wednesday, "Investor interest is limited."

Spotlight on: the importance of 'top-down' portfolio allocation

The key contributor to the growth in value of your client's policy is the portfolio of funds chosen both at outset and throughout the lifetime of the bond. Thus, if the bond is assumed to be the 'vehicle' used to achieve your client's saving goals, the funds chosen could be seen as the fuel needed in order for it to travel in the right direction.

However, the consequences of not spending enough time on portfolio construction can be far-reaching and extremely damaging to the value of your client's investment bond over its lifetime.

A common issue is an unknowing over-investment in a particular sector, asset class or geographic region, resulting in the value of the portfolio being largely dependent on the fortunes of the over-invested holding, a scenario at odds with the most basic principles of diversification.

It is particularly easy to become over-invested in a single area if attention isn't paid to the make-up of individual funds within a portfolio. As an example, many global equity funds follow leading indices that may be overweight in the Financial sector or U.S. Equities (for example) at any given time. In this scenario, a client that has another fund within their portfolio that invests solely in Financials, in a bid to diversify sector coverage, may unknowingly find themselves over exposed to the sector.

Just as important as the initial research and portfolio allocation is the on-going maintenance of the portfolio on a regular basis, in order to prevent the likelihood of 'portfolio drift'. Portfolio drift is an issue whereby the combined make-up of a portfolio of funds changes over time. If, for example, the manager of a single fund in the portfolio changes his outlook on the Healthcare sector and instead chooses to invest in the Construction sector, the overall make-up of the portfolio can become significantly different to how it may have looked when originally allocated, which, if done properly, should complement the client's risk/return profile.

Different advisers base their fund recommendations on varying factors. Some will favour particular fund managers, others might look solely at performance or independent ratings, whilst some may look at portfolio construction from a 'top-down' perspective - first deciding which asset types, sectors or asset types best suit their client's profile and building a portfolio of funds that meet these requirements. Top-down portfolio allocation, therefore, is concerned with selecting assets (initially, at least) on a purely macroeconomic basis, with further filtering (concerning preferred fund managers or performance for example) being a secondary part of the process.

In recognition of this and in order to assist brokers with their top-down fund selection process, Hansard has developed a new web-based fund application, available on Hansard OnLine now.

The new Unit Fund Centre (UFC) provides access to a wealth of fund information, enabling you to refine your research to those funds that best fits your client's needs, or your personal outlook on the global economy from a top-down perspective. The UFC also brings together each of the Hansard OnLine fund tools into one, central location.

For example, if you would like to view only those funds that hold stocks in the Telecommunications sector that have a geographical focus in the Asia Pacific region, the UFC will return a list of funds that meet this specific criteria. Of course, funds can also be grouped based on their sector currently and fund management group, for ease of use.

Once presented with the results, interactive performance and holdings data can be further researched to choose the right funds towards constructing a suitable fund portfolio.

Consensus amongst many of the world's leading asset managers suggests that the current unpredictability of the markets looks set to continue for some time to come. Only by understanding where your clients are invested during these times are you able to appreciate the vulnerability or stability of their fund portfolios during such turmoil - the UFC can assist you in doing this.