This dark, mysterious and a bit scary environment is leading into a large scale worry on both sides of the Atlantic. Although we are feeling some of the chill from this US sub-prime market meltdown with the likes of Northern Rock, we believe this could be just the beginning.
In many ways the current financial climate has the same eerie feeling of the hedge fund LTCM crisis. Given the very nature of the global uncertainty, it is reasonable to expect that financial stocks would have taken the biggest battering.
HSBC and Standard Charter are holding on due to their diversified revenue streams however I am weary about valuations. Expect further downwards particularly to Standard Charter as the crisis spreads to macro economic factors.
In the midst of uncertainty we believe lies opportunity. Defensive shares, diversified geographical revenue streams, precious metals and commodities seem to be winning in this type of environment. This is not to say that these shares are immune, but in general they are likely to fall less sharply than some of their counterparts.
Positive changes in profit revisions with respectable macro economic drivers make these sectors lucrative over the next 12 months.
Estimates Profit Growth – Utilities (Lighting it up)
Playing the right cards is key! Its a global investable universe. Key on to companies addressing emerging Asia such as mining, and industrials. Domestic demand continues to rise in these markets which will insolate them better from exogenous factors such as the credit issues in the US.
These views are independent of FactSet Europe Ltd and are proprietary to Bobby Rakhit. For any comments please contact rakhitreport@yahoo.co.uk.