Stubbornly low inflation and occasional bouts of deflation have the European Central Bank looking very seriously at introducing more quantitative easing in 2016. A resulting decline in the value of the euro should help boost exports, tourism and consumer spending.
Gerald Du Manoir, portfolio manager comments: “The eurozone economy is recovering, but it’s hard to do a victory lap when GDP growth is 1.5%. The feeling has been that it will never be as good as you hope for, and it will never be as bad as you fear. That’s Europe.”
Despite Japan’s economy continuing to decelerate, and financial turmoil in China having a knock-on effect, opportunities are emerging among certain sectors of the economy, particularly tourism and retailing.
The government recently loosened visa restrictions for those wishing to visit Japan, which has resulted in a flood of new tourists and an increase in retail purchases by foreign visitors. Despite China’s slowdown, the largest influx of tourism is coming from China.
Andrew Suzman, portfolio manager comments: “The real question for Japan is, can quantitative easing and better corporate governance really provide a meaningful tailwind to the economy? Frankly the jury is still out.
“That being said, I still think it’s very much a stay-the-course moment. Valuations are low and the companies that I’ve been interested in lately have been more domestic oriented, rather than pure exporters.”