Merrill strategists weigh in, heavy focus on Asia
Thursday January 8, 2:56 pm ET
By Greg Cresci
NEW YORK, Jan 8 (Reuters) - Merrill Lynch & Co.'s (NYSE:MER - News) top research strategists on Thursday offered forecasts for 2004 that focused heavily on Asia and downplayed investment opportunities in the United States.
A group of eight Merrill research executives weighed in on a host of global economic issues at a press conference at the firm's headquarters in New York, ranging from the decline of the U.S. dollar to the state of emerging markets.
"We think global equities will outperform U.S. equities," said Thomas Sowanick, Merrill's head of global strategy and economics. "Asia, not just China but Asia, will remain a source of growth ... The U.S. dollar, we think, will continue to trend lower throughout 2004 and perhaps into 2005."
The U.S. dollar was pummeled throughout 2003 as investors dumped the greenback for other currencies, such as the euro. The euro rose nearly 20 percent in value against the U.S. dollar in 2003.
David Bowers, Merrill's chief global investment strategist, noted that international stocks outperformed U.S. equities in 2003 due to the weak dollar.
"We are overweight emerging markets in our global equity portfolio," Bowers said. "If there is a surprise for 2004, as international equities outperform, I think one of the places it's going to be is potentially in Japan."
Merrill has $1.4 trillion in assets.
Much of the panel's discussion centered on Asia, and in particular China, the world's most populous nation with 1.3 billion people.
"The Asian story is getting a lot of air time right now, but we don't think the Asian story is over," said Timothy Bond, Merrill's chief Asia-Pacific economist. "We think it's just begun."
Bond noted that India's economy right now is growing almost as fast as China's, which he said is currently growing at 11 percent to 12 percent per year.
He also said other countries in the region such as Thailand and South Korea will pick up slack from any slowdown in China.
Bond said China will likely account for 26 cents of every new dollar in world economic output for 2004. By comparison, he said, the United States will account for about 22 cents of that.
As part of its blistering growth, China also is driving a resurgence in global inflation, Bond said.
Growth for the Asian region should rise to 6.5 percent in 2004, up from 5.5 percent in 2003, he said.
"Over the medium term, there is simply enormous potential in Asia. As Asia rises in 2004, we think you should be buying Asian stocks, buying Asian currencies and selling global bonds," Bond said.
As for the United States, Merrill's chief U.S. strategist, Richard Bernstein, reiterated the view that profit growth at U.S. companies will slow significantly in 2004.
He said the firm's forecast for the benchmark Standard & Poor's 500 index (CBOE:^SPX - News) calls for it to be at 1010 one year from now. That would be about 10 percent below the S&P 500's close of 1126.33 on Wednesday. |
