Do you really know bitcoin? Here are 11 myths

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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While there were plenty of other big surprises in 2013, no business story likely was more unique than bitcoin, the online simulated currency that threatened to shake up the global monetary system.

Debate raged over bitcoin’s legitimacy: Was it just a playful creation of hobbyists, or a new exchange medium brought about as a logical reaction to profligate currency manipulation from the world’s central banks?

Nick Colas, chief market strategist at ConvergEx, was one of the early Wall Street analysts to take a serious look at bitcoin back in February. To wrap up 2013, he examined what he sees as 11 myths surrounding the subject.

1. Bitcoin is huge

For all the talk and hype, bitcoin is tiny with a total value of just USD 10.8 billion. That compares to the total stock of US dollar at USD 800 billion, Colas said in a report. There’s also about USD 4 trillion in global currency traded every day.

(Read more: What you need to know about digital currencies)

2. Bitcoin enables drugs and terrorism

Colas argues that bitcoin is “way too volatile” for the average drug dealer or terrorist. That’s not to say that “some enterprising dealers” don’t use it, but if it was widespread Colas contends its value would be “USD 10,000 or higher” compared to Friday morning’s trading value of about $800.

3. Bitcoin is a currency

This is perhaps the most contentious observation, as bitcoin is often referred to as a “cryptocurrency.” Colas offers that bitcoin is “a system much more than a ‘currency'” in which holders agree to take part in a transaction of value.

Banking analyst Dick Bove may have been more to the point, where in a recent analysis he called bitcoin a “low-cost replacement for credit cards and other payment mechanisms.” There are virtually no costs involved with bitcoin transactions, as opposed to wire transfers, for instance.

4. Bitcoin has never been more volatile than now

Untrue, according to a chart Colas prepared analyzing bitcoin’s one-month returns and standard deviation. It actually was more volatile in May 2011, before most people even had heard of bitcoin.

(Read more: Behind China’s love affair with bitcoin)

5. Chinese citizens can’t buy bitcoins

BTC China has been one of the most dominant exchanges for bitcoin, with nearly 10 million transactions over the past month, according to bitcoincharts. That’s despite a government ban on financial institutions handling such transactions.

6. Bitcoin is not a store of value

This is an expression often given to gold and silver, and Colas said it does not apply to bitcoin. “Bitcoin may one day prove it deserves to sit alongside those assets,” he said. “It isn’t there yet.”

7. Bitcoin is untraceable

Bitcoin transactions happen online. Enough said. (Though Colas does offer: “If you think anything you do online is secret, I can’t help you.”)

8. Losing anonymity will render bitcoin useless

Conversely, traceability doesn’t dim bitcoin’s allure, which is really in its low or no-cost transactions.

(Read more: Big US online retailer to accept Bitcoin)

9. It’s a Ponzi scheme

No, it isn’t. Ponzi schemes have no other intent than to defraud. There’s no evidence to suggest that bitcoin is in the same boat, despite the strong price volatility and attraction for speculators. The Federal Reserve has noted the “potentially significant positive social value” of bitcoin, Colas noted.

10. Bitcoin is “ready for prime time”

No, it isn’t. As Bove, Colas and numerous others have pointed out, bitcoin won’t get legit until price volatility gets tamped down and a truly safe, mainstream storage place emerges. Colas suggests banks, Paypal or Apple come up with a storage device.

11. Something better will kill bitcoin

This one doesn’t get so much play, but it’s worth considering. Bove has contended that being first gives bitcoin a tremendous competitive advantage, and Colas echoes that point. “There are other online money transfer products out there, of course, and more to come,” he said. “The challenges will be the same for all of them: security, utility and legal compliance.”

The quest to meet those challenges likely means bitcoin remains a serious story for 2014.

“I absolutely understand why there are so many bitcoin haters out there. But don’t hate the player; hate the game,” Colas said. “Technology is a tremendously disruptive force in society, and it knows no boundaries. It disturbs every status quo. That’s what is does. Just don’t make the mistake of thinking that you can reverse it by calling it a bubble.”

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What do fund managers do with unpopular asset classes?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As investors chase their new-found love for developed market equities, take a moment to pity the poor fund managers who find the fickle markets giving their asset classes the cold shoulder.

“It can be pretty demoralizing,” said Travis Hamilton, managing director at Khan Investment, which focuses solely on Mongolia. “I’ve had a number of people ask me, ‘how do you get up every day and keep doing what you’re doing?'”

“If you look back at 2012 or 2011, a number (of managers) were courting Mongolia. There was a huge amount of exuberance and enthusiasm. Almost all of them have packed up and left,” he told CNBC.

(Read more: Will foreign investors give Mongolia another shot?)

Foreign investors abandoned one-time frontier-market darling Mongolia over the past 18 months amid a prolonged dispute between the government and private-sector partners over Rio Tinto’s USD 6.6 billion Oyu Tolgoi mine. Foreign direct investment (FDI) fell 17 percent in 2012 and then fell a further 42 percent in the January-to-August period this year.

The government has since passed a new investment law in hopes of restoring foreign investor confidence and is negotiating with Rio Tinto to end the dispute.

Hamilton believes pulling out of Mongolia was just short-term thinking, as it may take at least 10 years to pay off. “Investors in any emerging market or frontier need to consider that,” he told CNBC.

(Read more: Bond fund manager: I hate bonds)

While his fund hasn’t faced redemptions, “it certainly is fair to say it has been very challenging in terms of attracting new capital to the strategy,” he said. “All we can do (is) keep marketing and promoting the fund,” as well as keeping current investors “very informed” of developments.

His fund hasn’t suffered alone. Investors have pulled around USD 15.58 billion out of dedicated emerging market equity funds and USD 14.04 billion out of emerging market bond funds so far this year, according to data from Barclays.

Others have asset classes that aren’t a niche market, like Mongolia. Financial advisors may generally consider fixed income a necessary core holding as part of most investors’ portfolios, but bond funds globally have seen around USD 15.22 billion of outflows over the past three months, according to data from Jefferies.

(Read more: Goldman: Cut your emerging markets exposure by a third)

Fixed income managers are coping by talking down expectations.

“You have to be realistic,” Cecilia Chan, HSBC’s chief investment officer for fixed income in Asia, told CNBC earlier this month.

“When I talk to the customer, I try to be genuine. I’m not telling you that you will get rich buying bonds,” she said, noting HSBC has around USD 50 billion worth of bonds under management.

 “The great rotation, the attractiveness of equities as a headline story, the macro environment (are) supportive in terms of selling equity,” Chan said. “But in reality, whether it will materialize into actual returns nobody knows. For equities, it comes with volatility, market timing as well. Bonds still are a lower risk asset class,” she noted. “We need to manage risk.”

Others take a similar approach to their unpopularity, being upfront about the likelihood of losses.

Fixed income has done well for the last 30 years, noted Kumar Palghat, chief investment officer at fixed income specialist Kapstream Capital, which has around 6 billion Australian dollars, or around USD 5.33 billion, under management. “It can’t go on forever,” he told CNBC.

(Read more: Take cover! Bond market ‘hell’ could be on the way)

He doesn’t have a problem with telling clients his offerings face a difficult outlook.

“They have to step up and admit that their asset class isn’t going to do as well,” he told CNBC. “They didn’t do well in 2013 and they’re not going to do well in 2014,” he said.

“I don’t sell the product just to sell it. I’m happy to say bonds will underperform equities. Otherwise, you’re just pushing a product,” Palghat said. He noted, however, that he continues to see demand from longer-term investors such as pension and superannuation funds which can’t have all their money in equities.

(Read more: Euro zone bond rally may be ending: Here’s why)

He tells his clients that if they must be in bonds, there are strategies to minimize the capital losses that are likely to come from the expectations interest rates will rise.

To be sure, being unpopular can be a boon for bargain-hunting.

As investors pulled out of emerging market bonds, Hamilton’s Mongolia fund started buying, picking up Mongolian debt at around 58 cents on the dollar.
 

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Japan inflation at fresh five-year high in November

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Japan reported a 1.2 percent on-year rise in inflation in November, marking a fresh five-year high.

The November consumer price index (CPI) was above expectations for a 1.1 percent rise in a Reuters poll and up from October`s 0.9 percent rise.

Core CPI – excluding food and energy prices – rose 0.6 percent on year in November, its highest level in 15 years.

Abenomics – a series of policy measures unveiled under Prime Minister Shinzo Abe in April to jump start the Japanese economy – underlie the rise in inflation.

“It looks like Abenomics is working, according to headline inflation numbers. Now, we have to see whether they have to ease [with] more extreme measures to get it where they want to or can they afford to let it run for a while,” said Jesper Bargmann, head of trading, Markets, Singapore at Nordea.

“The whole market is buying into Abenomics so of course, if inflation starts picking up quicker than expected, then yes it`s a success but it could also mean that they might not have to go as extreme as the market expected,” he added. 

Friday`s figures bring the Bank of Japan closer to reaching its target of 2 percent inflation in two years. The reading comes hot on the heels of comments from Bank of Japan Governor Haruhiko Kuroda on Wednesday that Japan`s consumer inflation is likely to exceed 1 percent in the first half of 2014 and will help heighten inflation expectations.

For the Tokyo area, Japan reported a 0.7 percent on-year rise in core CPI for the month of December, in line with expectations.

Japan also posted retail sales and industrial output data on Friday.

Retail sales rose 4.0 percent on year in November, well above expectations for a 2.9 percent rise in a Reuters poll and marking their fastest pace since April 2012.

The data underpinned a pick up in private spending ahead of a national sales tax hike due to take effect in April, which will see the sales tax rise to 8 percent from 5 percent currently.

Industrial output rose 0.1 percent on month in November, below expectations for a 0.4 percent rise.

According to the Japanese Ministry of Economy, Trade and Industry (METI), Japanese manufacturers see output at 2.8 percent on month in December, up from the previous forecast of 2.1 percent. For January, manufacturers see output at 4.6 percent on month.

Following the data the yen fell to a fresh five-year low of 104.93 per dollar. The Nikkei 225 rose 0.3 percent to a fresh six-year high in early trading, extending its rise above the 16,000 level. 

Copyright 2011 cnbc.com

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The bullish case for bonds: Pimco exec Crescenzi

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Longer-term bonds rates are normalizing as the US Federal Reserve scales down its asset purchases, but the central bank’s policies should still anchor shorter-term bonds well into the second half of 2015, Pimco’s Tony Crescenzi told CNBC on Thursday.

“The Fed is losing its grip on longer rates,” Crescenzi said on “Squawk Box.” “Short rates it controls, and it will control them until a rate hike is near, and that’s somewhere in 2015—probably the latter half given what the Fed told us.”

Longer-term bonds rates are normalizing as the US Federal Reserve scales down its asset purchases, but the central bank’s policies should still anchor shorter-term bonds well into the second half of 2015, Pimco’s Tony Crescenzi told CNBC on Thursday.

Crescenzi, a portfolio manager and executive vice president at Pimco, said investors have had time to prepare for rising rates in longer-term bonds because the Fed telegraphed its decision to taper its massive bond-buying program in May 2013 before actually reducing its purchases last week.

Fed policies should help contain 10-year Treasury yields under 4 percent and mainly between a range from 2.75 to 3.25 range next year, “simply because the economy has momentum that people are banking on.”

Read more: US bond market selloff weighs on mortgage apps

Pimco projects 2.5 gross domestic product growth next year, Crescenzi said. Overall economic acceleration cause a new high 10-year yields and scare bonds investors, but it won’t be a “meaningful high,” Crescenzi said.

— By CNBC’s Jeff Morganteen. Follow him on Twitter at @jmorganteen.

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If this happens, ‘get into your bomb shelter’: Trader

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The 10-year Treasury yield touched 3.0 percent on Thursday for the first time since September. And while that didn’t prove particularly hazardous to the stock market, Jeff Kilburg of KKM Financial says equities will be watching yields very carefully from here on out.

“It’s all about the manner we move,” Kilburg said on Thursday’s episode of “Futures Now.” “Three percent to 3.25, that’s not a big deal. But if we get there in a week or two weeks, that ferocious manner will really make people rethink their equity portfolio and their equity allocations.”

Read more: On tap for next year: Legit economic growth?

The real test will come when the 10-year yield hits the next round number.

“If we see 4 percent on the 10-year yield in the first quarter of 2014, crawl into that bomb shelter, because that will crush every market out there,” Kilburg said.

Earlier in the show, Dennis Gartman had predicted that 4 percent was around the corner.

“We’re probably going to see 4 percent yield on the 10 year before the end of 2014, if not higher,” said the founder of The Gartman Letter.

Read more: Dennis Gartman: Here’s my single best trade for 2014

Unlike Kilburg, though, he is not overly worried about higher yields’ effect on equities.

“I think [a 4 percent yield] will simply be exemplary of strong economic growth, and nothing more than that,” said Gartman, who remains bullish on stocks.

—By CNBC’s Alex Rosenberg. Follow him on Twitter: @C NBCAlex.

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How cutting benefits also will cut jobless rate

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The looming end of emergency jobless benefits would be bad news for 1.3 million Americans but actually could have a positive impact on the unemployment rate.

At a time when the monthly jobless count has taken on even more importance than usual, the move in Washington toward ending the emergency compensation immediately would drop the unemployment rate below 7 percent, according to an analysis from Joe LaVorgna, chief US  economist at Deutsche Bank.

“If extended benefits expire, the unemployment rate could abruptly fall based on data the (Bureau of Labor Statistics) provides on the behavior of the long-term unemployed,” LaVorgna said in a report for clients.

The analysis runs counter to recent comments from Fed Chairman Ben Bernanke, who said he didn’t expect much impact from the end of extended compensation.

Read more: On tap for next year: Legit economic growth?

The headline rate has fallen from its recession high of 10 percent due in part to job creation in 2013 that has grown to just short of 200,000 percentmonth, but more particularly because of a shrinking labor force.

Labor force participation has hovered around a 35-year low for most of the year. Because the BLS only counts those actively seeking jobs as unemployed, the rate has been able to slip.

The unemployment rate is especially significant because the Federal Reserve uses it to chart its monetary policy path. Most recently, a drop to 7 percent in November helped convince the US  central bank that it could scale back its monthly bond-buying program known as quantitative easing.

Read more: Fed to tapercentbond buying by USD10 billion a month

However, the Fed has said that it will not consider raising interest rates until unemployment falls to at least 6.5 percent.

With that number getting nearer, another drop could be seen as a step closer to interest rate normalization. The Fed began tapering QE ahead of what the market had expected as well.

According to LaVorgna’s analysis, BLS data have shown that of the 1.3 million who would lose their extended benefits, 23 percent likely would leave the labor force, causing the unemployment rate to drop two-tenths of a percentage point.

In addition, another 850,000 who are on extended state unemployment benefits would be impacted in the first quarter of 2014. Using the same formula would see the rate drop another 0.1 percentage point to 6.7 percent, LaVorgna said.

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“This does not even account for the ongoing improvement in the labor market,” he added. “Large job gains akin to what we have witnessed recently would push the unemployment rate even lower.”

Finally, there’s the unsettled question over whether cutting benefits pushes people back to work. A drop in government support may help push some into taking jobs they may have refused otherwise.

Whether that would push the Fed into early action on rates is unclear. Open Markets Committee members are fully aware that the labor force participation rate decline—not stellar job growth—has been integral to the declining unemployment rate.

In fact, if the rate did drop that quickly, it probably would result in the Fed following through with its economists’ suggestions and lower the unemployment rate threshold to 6 percent or even 5.5 percent before action on interest rates.

Congressional Republicans have refused to extend benefits without having a means to pay for it, likely through a corresponding spending cut. The extension allows jobless Americans to collect in some cases up to 99 weeks and has been approved 10 times.

But with economic data improving and Congress looking for ways to cut costs, the extension was left out of the spending deal agreed to earlier in December.

—By CNBC’s Jeff Cox. Follow him on Twitter @JeffCoxCNBCcom.

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Why Asia can brush off tapering next year: Invesco

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The first mention of the word `taper` earlier this year prompted a brutal sell-off across Asian assets, but now that the dreaded taper has begun, investors in Asia have no need to worry, according to investment firm Invesco.

Last week the US Federal Reserve took its first step toward winding down its huge monetary stimulus program, announcing it would reduce monthly asset purchases by USD 10 billion to USD 75 billion starting in January, broadly in line with expectations.

After months of speculation, markets were unfazed by the event, with major indices actually rallying in response, in stark contrast to the 16 percent sell-off seen on the MSCI Emerging Market index seen from late May to June.

Read more: Ding ding: Taper tantrum round two?

According to Paul Chan, chief investment officer of Asia ex-Japan at Invesco`s Hong Kong office, tapering is nothing for Asian markets to fear.

“We believe the commencement of tapering near year-end helped to remove probably the largest uncertainty that haunted global markets in 2013… We are confident that Asia as a region can withstand the impact of an orderly tapering,” said Chan in a note published Wednesday.

Read more: Fed taper seen as positive for economy, bad omen for bonds

According to Chan, there are a number of reasons why Asia is better positioned to withstand the withdrawal of the Fed`s easy money next year, in contrast to 2013.

Firstly, Asia`s export sector is likely to be in a strong position next year, as it benefits both from the recovery in the US economy and recent weakness in many Asian currencies making their exports attractive abroad, said Chan.

Chan pointed to the strong rebound in Chinese exports to 5.6 percent year-on-year in October, rising from a 0.3 percent decline the previous month, as evidence of this trend.

Read more: Why Asian property investors may fear US taper

Secondly, Chan alluded to the much discussed `tapering not tightening` argument, and reiterated that although the Fed is reducing the size of its asset purchases, it is still pumping large amounts of stimulus into the global economy meaning the liquidity should remain supportive.

“Asset purchase tapering simply means a smaller net addition of assets on the Fed`s balance sheet, not an outright sale of assets. Liquidity within the global financial system should remain ample for emerging market assets,” said Chan, adding that the Fed`s commitment to an extended period of low interest rates provides an assurance of liquidity costs for Asian corporates, especially on short-term dollar denominated debt.

Finally, Chan acknowledged that further changes to the Fed`s stimulus program could prompt some volatility in Asian equity and currency markets, but said any reaction would be driven more by sentiment than fundamentals, making it less damaging.

“Most Asian countries are now enjoying a much healthier level of foreign exchange reserves and the systematic risk of foreign currency denominated debt is significantly lower than pre-Asian financial crisis,” said Chan.

Furthermore, Chan added that the market correction seen in mid-2013 in some South Asian markets, has meant the fear of tapering induced capital outflows from these countries has already been priced in, bringing valuations to more reasonable levels.

“The realization of tapering commencement as well as well-managed interest rate guidance by the Fed should reduce the volatility in Asian equities as we celebrate the coming of 2014,” said Chan.

– By CNBC`s Katie Holliday: Follow her on Twitter @hollidaykatie

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Could dollar-yen hit 125 next year?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As the yen hit a five-year low on Thursday, analyst calls are becoming increasingly bearish, with some saying the currency could fall as low as 125 per dollar by the end of next year.

The yen hit 104.84 per dollar in early Asian trade on Thursday, the second time its hit the five year low this month , after the Bank of Japan (BOJ) said it would continue its unprecedented easing program, while the US Federal Reserve will begin to trim its stimulus program in January.

Analysts now expect the weakening trend to pick up pace as we move into 2014.

“If we look at the period pre-crisis in Japan we had dollar yen in a 103 to 125 range. We`re finally breaking back into the pre-crisis range for dollar-yen,” said Timothy Riddell, head of global markets research for Asia at ANZ.

“Dollar-yen is on track to end 2013 with a bang,” added Mitul Kotecha, head of global currency research at Credit Agricole.

“Further evidence that `Abenomics` is working in the form of rising inflation points to a further move higher in dollar-yen over coming months; we continue to anticipate a move in the dollar-yen to 115 by end 2014,” he added.

The weaker yen has been one the biggest currency stories of 2013. The yen is down 20 percent year-to-date against the dollar amid the Japanese government`s efforts to radically reform its economy in a bid to achieve 2 percent inflation in roughly two years` time.

However, while the currency saw rapid losses in the first five months of the year, the trend appeared to lose momentum halfway through when the advent of `taper talk` prompted the yen to strengthen back to the 94 per dollar level in June, while at the same doubts about the success of Abenomics also helped derail the trend.

But in recent months, the yen`s downward trend has regained some momentum as uncertainty over the Fed`s taper talk subsided and positive economic data out of Japan increased confidence that Prime Minister Shinzo Abe`s plan was working. The dollar-yen has gained near 7 percent since the start of October.

Credit Agricole`s Kotecha added that the removal of some of the negative headwinds impacting Japan next year would also reinforce downward pressure on the yen.

“A disappointment for yen bears over 2013 has been the lack of portfolio capital outflows by Japanese investors. Outflows were expected to provide a negative influence on the yen but so far any such outflow has been limited,” he said.

“Going forward it is our expectation that relatively higher yields and in particular improving risk appetite will fuel bigger capital outflows and reinforce the downward pressure on the yen,” he added.

Meanwhile, Nizim Idris, head of strategy, fixed income and currencies, at Macquarie bank also told CNBC on Thursday he also saw the yen resuming its weakening trend over next year.

However, he added that the Bank of Japan many need to increase its easing program to keep it on a downward course. He forecasts dollar-yen at 110 by the end of 2014.

“Right now I am still not confident, although the direction of travel in the dollar-yen is precisely where the BOJ wants it to go, so therefore they are happy to sit back and say we are hitting that 2 percent over two years, once it [dollar-yen] moves in the wrong direction I think these guys will have to do more,” he added.

Japan is due to report consumer price index data for November on Friday, December 27th. According to a Reuters poll of 28 economists, inflation is seen reaching a new five-year high of 1.1 percent on year in November. Inflation stood at a five-year high of 0.9 percent in October.

– By CNBC`s Katie Holliday: Follow her on Twitter @hollidaykatie
Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Some fund managers turn positive on emerging markets

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Going bearish on emerging markets may have become the consensus call, but some fund managers are quietly turning more positive, citing attractive valuations.

“I fail to see any good reasons to be bearish,” said Benoit Anne, head of emerging markets strategy at Societe Generale, in a note.

(Read more: Goldman: Cut your emerging markets exposure by a third )

In May, the Federal Reserve first broached the possibility it would begin tapering its USD 85 billion-a-month asset-purchase program, leading emerging market stocks and currencies to convulse amid fund outflows. Countries with perceived imbalances, such as current account and fiscal deficits, including India, Indonesia and Thailand, were among the hardest hit.

Markets stabilized and many recovered solidly in September after the Fed decided to keep its asset purchases steady, and didn`t react strongly to news earlier this month that asset purchases would be cut to USD 75 billion a month starting in January.

But USD 13.7 billion has flowed out of emerging market bond funds for the year through December 18, while USD 6.3 billion has left emerging market equity funds over the same period, according to data from Jefferies.

(Read more: Next emerging market sell-off may be time to pounce )

“I am being told at this point by our clients is that we are the only ones on the sell-side calling for a global emerging markets rally in January,” Anne said, but added “by then the impact of Fed policies would have been fully priced (in) and valuations in emerging markets would have improved to irresistible buying opportunities levels.”

To be sure, he isn`t calling for an across-the-board rally, advising “cherry picking.” But he expects the differentiation will be based on valuations, rather than the “past obsession” with current account deficits.

“In markets, it is all about risk/reward as well as cost of carry, and when I look at emerging market currencies and emerging market rates, only a few markets strike me as majorly overpriced,” he said.

(Read more: Why these emerging market taper victims can tough it out )

His view is in stark contrast to the consensus. Earlier this week, Goldman Sachs advised cutting emerging markets exposure by a third, expecting “significant underperformance and heightened volatility over the next five to 10 years.”

A net 10 percent of global fund managers are underweight emerging markets, well below long-term averages, according to a December survey by the Bank of America-Merrill Lynch. Among developed markets, 34 percent of global fund managers are overweight Japan, 7 percent are overweight the U.S. and 43 percent are overweight the Eurozone, the survey found.

But Anne isn`t alone.

“The G-3 economies are headed toward synchronized (albeit moderate) growth in 2014. This positive news, however, is already priced into most equity markets,” said Jeff Hussey, global chief investment officer at Russell Investments, which has USD 246.8 billion under management.

Global developed market equities have re-rated, with the trailing price-to-earnings ratio rising to 16.4 times at the end of November from 13.8 times at the end of 2012, the report said.

“P/E ratios (in developed markets) are unlikely to rise much more,” he said. “The most persistent and significant valuation advantages lie in emerging markets.”

(Read more: How some emerging markets get taper insulation )

“Uncertainties over credit conditions in China and the impact of Fed tapering on current account deficit financing are reasons to be cautious for now, but this is an opportunity that warrants close attention,” he said.

“Value there remains strong, and the prospect of increasing export demand from developed economies will support emerging market growth,” Hussey said, adding Russell`s conviction there remains positive for the longer term, even though it is tactically neutral as it watches for Fed tapering effects.

Within fixed income, Russell recommends hard-currency emerging market debt, priced in dollars or euros, over local-currency debt amid expectations tapering may weigh on emerging market currencies over the coming months.

-By CNBC.Com`s Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Why a new government may not boost India’s reform prospects

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Hopes for a change of government in India’s upcoming elections have helped the subcontinent’s currency and shares recover from sharp declines earlier this year, but the optimism may be premature.

After a strong performance in state elections completed earlier this month, many expect the opposition Hindu nationalist Bharatiya Janata Party (BJP), led by Narendra Modi, could oust the current ruling Congress party in national elections set to be held by May. The Congress party’s image has been tainted by a poor economic performance and the slow pace of legislative changes.

(Read more: Why India’s state elections matter)

Modi, the prime ministeriaal candidate of the BJP who is currently serving as the chief minister of Gujarat, has been applauded for his investor-friendly policies that have led the state to double-digit economic growth.

“The perception is that Modi is more pro-market, (that) Modi is more pro-reform and therefore he could do it,” Nizam Idris, head of fixed income and currency strategy at Macquarie, told CNBC.

“However, he also has a history of being divisive. BJP has been divisive. Historically there were even riots in the place that he was a governor,” he added. “You need to be a bit more cautious here. It’s easy to promise things, but harder to deliver, especially in India.”

(Read more: ‘Universal’ frustration with pace of India reforms: Hero CEO)

 Others also have doubts about the wave of optimism spurred by the prospect of a BJP victory.

“I’ve been surprised by a lot of our clients, how positive they’ve been,” said Timothy Riddell, head of global markets research for Asia at ANZ.

“Whether he can really get a majority is going to be key. The assumptions that a lot of our clients, especially in Europe, are talking about is he’s going to sweep in with a huge majority. We don’t really see that as being likely,” Riddell told CNBC.

(Watch: India’s ruling Congress party on backfoot: Expert)

“You could get into a scenario where he comes in talking a bullish story but he can’t actually get anything through,” he said.

Indeed, BJP’s success in state elections hasn’t always translated well to a national stage. In 2003, the BJP performed well in the state elections, but lost the national elections held a few months later in 2004.

“He’s actually got quite destabilizing policies. He can alienate quite a large section of the Indian community,” Riddell said. “His approach toward ethnic diversity is not really what we’d want to see in a country like India,” he said.

(Read more: India’s Rajan in tough spot as stagflation risk emerges)

The stakes are high as India faces a rocky economic outlook, with concerns stagflation — where accelerating inflation is not met by higher growth rates — might emerge.

Recent data such as industrial production – which contracted 1.8 percent year-on-year in October following a 2.0 percent rise in the previous month – have raised concerns over the growth outlook. Consumer prices, meanwhile, rose at their fastest annual pace on record at 11.2 percent, from 10.1 percent in the previous month.

For investors, the question may also be whether all this optimism has already been priced in by the markets’ steady recovery since the May-to-September volatility after the U.S. Federal Reserve initially broached its plan to begin tapering its asset purchases, leading to fund outflows.

(Read more: India market euphoria could end in disappointment)

The US dollar is now fetching around 61.76 rupees, down from a record high just shy of 70 touched in late August, as the Indian currency strengthened.

India’s Sensex stock index has also gone from being one of the region’s worst performing to touching a record high of 21,483.74 in the wake of the BJP’s state election win. The index closed Tuesday at 21,032.71, marking a more than 8 percent gain for the year.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow