Global Shares Likely To Remain Up, Says Economist

By Tengku Noor Shamsiah Tengku Abdullah SINGAPORE, Feb 18 (Bernama) -- Global shares are vulnerable to further consolidation or correction in the short term given high levels of investor sentiment, strong year-to-date gains and Greek worries. However, any pullback globally is likely to be mild and the broader trend is likely to remain up, says Dr Shane Oliver, Head of Investment Strategy and Chief Economist of AMP Capital Investors. "Valuations are attractive particularly against very low bond yields, the risk of a eurozone meltdown has receded, momentum in global economic indicators is positive, global monetary conditions are getting easier and easier and there is lots of cash on the sidelines," he told Bernama. He said the “yes we have a deal no we don’t” regarding Greece’s latest bailout negotiations raged on again over the last week, resulting in a volatile ride for risk assets like shares. "Our assessment is that a deal is more likely than not as both sides have potentially too much to lose, but the risks are high and in any case it could drag on a bit," he said. In a broader sense, Oliver said there was mostly good news regarding the European debt issue over the last week. Most importantly, bond yields in Spain, Italy, France and Portugal were little affected by the Greek related uncertainty of the last week, suggesting investors are becoming less concerned about contagion. He said global reflation remains an ongoing theme with the Bank of Japan announcing extra quantitative easing, a short-term inflation target of one per cent and a medium-term target of two per cent. "This is very significant. If Japan is serious about meeting its inflation targets it means more monetary easing in order to break the psychology of deflation and it could mean a fundamental turn in the Yen (down) and the relative performance of Japanese shares (up)," he said. Oliver said data releases over the last week were mostly positive with strong US data, a weaker than expected growth contraction in the eurozone and a contraction in the Japanese economy, but signs of growth bouncing back this quarter. He said even Australian economic data surprised on the upside, but with monetary conditions tightening on the back of rising bank mortgage rates, the strong Australian dollar, and the drumbeat of job layoffs seemingly getting louder, it is hard to see recent stronger data releases being sustained. "We still think there is a strong case to cut official interest rates further but the strong January jobs data and the Reserve Bank of Australia's relatively relaxed stance suggest the next cut may be several months away," he said. Oliver said the focus in the week ahead will likely stay on Greece with finance ministers to consider the bailout package on Monday. European PMI business conditions indicators (Tuesday) and the German IFO index (Thursday) will also be watched closely. -- BERNAMA