Standard Chartered Bank has released the Half- Two Global Market Outlook report dubbed ‘Keep CALM and carry on’ to guide investors on their next move. The report states unique steps that investors must take to ensure that they are able to navigate the challenging global and local economic situation.
In the second half of 2023, two extreme narratives will be jostling for investors’ attention. First, a ‘no-landing’ scenario which argues for chasing equities higher and secondly a scenario where risky assets are not worth holding at all as a deep recession awaits.
According to Manpreet Gill Singh the Chief Investment Officer, Africa, Middle East, and Eastern Europe – Standard Chartered the strategy is to Capitalise on market opportunities, allocate broadly, lean to Asia and Manage volatility (CALM).
“As we enter Half two 2023, financial markets are presenting a challenge to investors. Equity markets have surged, at least at a headline index level and our view is that they may rise further, at least in the short term. However, leading indicators of economic growth (particularly in the US) continue to paint a less optimistic picture and most major central banks remain much more concerned about elevated inflation than about weak growth indicators.”
The report further states that it is tempting to either wholeheartedly chase the surge in equities or retreat to a very conservative portfolio. Instead, investors are urged to keep CALM and maintain a steady hand in relation to their portfolios for instance capitalise on market opportunities through overweight high-quality government bonds, upgrading equities to core allocation, lock in Investment Grade bond, yields ahead of an eventual decline in cash yields, balance strong equity momentum vs. delayed recession risk, allocate broadly by diversifying to trump concentrated approach with Gold and liquid alternatives or private assets which can help as diversifiers.
The report confirms that there is greater relative value across equities and bonds. This is by using opportunistic allocation to manage volatility and for short-term gains Barbell sector strategies in US, Europe; consumer focus in China Cross-currency FX opportunities amid range-bound USD over 1-3 months.
“Africa remains an exciting investment destination with positive demographics, rising adoption of technology and rising consumer and business spending. With Africa set to account for 25 per cent of the global population by 2050 – and with robust growth in key sectors, the continent offers an attractive investment proposition for international capital,” said Head of Affluent Banking and Wealth Management – Standard Chartered Kenya & East Africa – Paul Njoki.
“Over the recent years we have witnessed most of the investment being concentrated in high-growth sectors such as tech and green energy as increasingly impact-oriented investors look for sustainable solutions to the various challenges like the climate crisis. In 2020, over half of all PE investments in the region were in the tech sector while African start-ups raised over $1 billion for the first time in 2021.”
He further stated: “Despite the various impediments, realignments in global supply chains could present some opportunities for Kenya and the continent as Western economies seek new sources of energy and commodities. However, Africa will only be in a position to take advantage of these shifts and drive forward social and economic development if FDI flows level out. This means both leveraging private capital for investments in Africa’s high-growth sectors and supporting structural reforms to improve the investment climate across the region.”
