cyprus setback opportunity top up

The fall in the FTSE 100 index off the back of the agreement to bailout Cyprus is part of an ‘overdue’ market setback investors should take advantage of, according to Barclays’ head of investment strategy.

cyprus setback opportunity top up


The key market index dropped more than 60 points in early trading to 6,429 but recovered slightly by midday to 6439, suggesting some investors had already taken advantage of the temporary market weakness.

Kevin Gardiner, head of investment strategy EMEA at the bank, said: “A setback seems overdue, but we think the primary trend in stock prices still points upwards, and such setbacks are likely to represent opportunities for under-invested individuals to add to long-term positions. Similarly, we think the primary trend in bond prices over the next few years is likely to be downwards, and rallies there could be used in many cases to reduce holdings."

Adrian Lowcock, senior investment manager at Hargreaves Lansdown, held a similar sentiment: “While we believe that the recent stock market rally has been more stable than previous ones, it is exactly this sort of events which can knock market confidence in the short term. However with the US, the world’s largest economy, having embarked on an unlimited amount of QE, there is significant support for investing in riskier assets.”

He added that markets with periods of retrenchment tend to be more sustainable in the longer run as they give investors the opportunity to “get back in at lower levels”.

Even after the strong start to the year for developed markets, which saw the Dow Jones reach an all-time high and the FTSE 100 top its pre-crisis level, Gardiner still sees value to be had in the asset class.

“US banks remain an inexpensive way of expressing a positive view on the US housing market and broader US economic recovery. Judging by the latest stress tests, the US banks sector is broadly in good shape. . If the economic recovery continues to broaden, as recent data would suggest, then we would expect sector profitability to benefit, particularly amongst the regional banks.”

He said the team’s various regional portfolios all contain biases to the sector in a variety of weightings.

The Cyprus deal has been termed a ‘bail-in’ because depositors in the nation’s banks will be forced to pay levys of 9.9% on balances over €100,000 and 6.75% for any amount held under that.

Worries about contagion were brought to the fore after the announcement but most concerns have focused on peripheral countries with core banks’ recapitalisation deemed much-improved.



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