Asset Allocation 360°: is China's transformation for real?

Welcome to the third edition of Asset Allocation 360°

A major shift in China’s economy is under way, as it moves from growth based on exports towards domestic consumption playing a greater role in fuelling GDP. The question, though, is can China succeed in this transition and sustain its new economic model in the long term?

Tim Bond, head of macro research at Odey Asset Management and former head of global asset allocation at Barclays, explores the implications of China’s economic transformation in our lead feature, in terms of the effects upon asset classes and other economies in the developed world.

In Europe, meanwhile, the two major liquidity injections from the central bank, coupled with Greece’s debt drama nearing the final act, has alleviated the continent’s debt woes, at least for the time being. While many industry experts concede the longer-term refinancing operations (LTRO) have provided a vital lifeline to Europe, staving off a potential liquidity crisis, they view them as a short-term painkiller that will not heal the wounds in the long run.

The ramifications of the LTRO are not restricted to Europe, though, and the excess liquidity has spilled over into the emerging markets, fuelling investors’ risk appetite in those areas again. Our regional and sector focus looks at the actions being taken by the emerging markets’ central banks in response to investors flooding back into these regions, and the funds that have returned the best results over the past quarter.

Our section on stress tests shows how, although the LTRO has arguably stopped the negative feedback loop, fund managers are still split on the relative attraction of European financials. The section also analyses the outlook for US banks, after four major institutions failed the Federal Reserve’s March stress test.

We hope you find our latest investment strategy guide useful for your asset allocation. Feel free to send us any feedback as to how our publication can evolve to meet your investment needs.

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Asset Allocation 360° is now available on the iPad: just double tap to zoom