The document provides an overview and analysis of global markets and investment strategies for February 2016. It recommends the following: - Looking for investment opportunities near the bottom of the wide trading range expected in volatile 2016 markets. Recent weakness in equities is overdone and equities are upgraded to overweight. - Staying positive on emerging market bonds for their attractive yields. - Markets are overreacting to global growth fears, and the document revises its outlook for the Chinese renminbi to weaker. Overall the global economy remains healthy and fundamentals do not indicate an imminent recession.

1. Market Watch – February 2016
Swing Low, Reach High
STRATEGY
Look for the
opportunities near to
the bottom of the
wide trading range
we expect in 2016
EQUITY
Recent market
weakness is
overdone and we
upgrade equities to
overweight
FIXED INCOME
Stay positive on
emerging market
yield with its
attractive carry
FX
Market risks
overreacting to
global growth fears.
Revising RMB weaker
Markets
started
2016
with
wide
swings,
resembling
the
mischief
and
unpredictability
of
a
monkey.
As
we
usher
in
the
Year
of
the
Monkey,
we
ask
whether
this
new
lunar
year
will
bring
prosperity
or
danger
for
investors.
In
our
December
2015/January
2016
Market
Watch
installment–
Swinging
Onto
Higher
Ground
–
we
suggested
that
2016
would
be
a
volaLle
year
for
markets.
This
is
already
evident,
perhaps
sooner
and
more
dramaLcally
than
we
expected,
as
markets
had
the
worst
start
to
the
year
on
record.
Now
is
not
the
Lme
to
panic,
but
to
assess
the
fundamentals
with
care
and
judge
whether
there
is
a
signal
in
market
weakness,
or
whether
it
provides
an
opportunity.
On
balance
we
are
opLmisLc.
We
examine
the
evidence
and
find
that
there
is
a
discrepancy
between
what
the
market
performance
and
what
the
fundamentals
reveal.
The
global
economy
is
sLll
growing
at
the
3.0-­‐3.5%
pace
of
recent
years;
nowhere
near
the
recession
that
some
of
the
bears
are
predicLng.
Some
countries
and
sectors
are
struggling,
but
this
is
far
from
a
generalized
downturn.
Our
reading
of
the
situaLon
in
China
is
that
growth
is
starLng
to
stabilize
at
lower
levels
aXer
a
mulL-­‐year
slowdown,
and
market-­‐related
policy
mishaps
do
not
have
much
material
impact.
The
credit
bubble
remains
a
concern,
but
policy
makers
have
the
tools
to
manage
the
problem.
We
conLnue
to
argue
that
markets
will
trade
in
a
broad
range,
due
to
uncertainLes
over
growth
and
monetary
policy.
However,
aXer
the
January
sell-­‐off,
we
think
that
risky
assets
are
near
the
boZom
of
this
wide
trading
range.
Facing
such
volaLlity,
investors
will
need
to
be
more
tacLcal
and
opportunisLc
this
year:
buying
when
markets
are
fearful
and
selling
when
others
are
greedy.
Trading
the
range
will
help
investors
navigate
through
the
swings
of
2016.
Last
but
not
least,
we
wish
everyone
health,
happiness
and
prosperity
in
the
Year
of
the
Monkey!
Marc Van de Walle
Global Head of Products

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