ECONOMY

Merrill Lynch says Greek market good for your portfolio

US investment bank Merrill Lynch views Greece in a very positive light, according to its chief global technical analyst and head of fixed income strategy, Tom Hobson, who came to Athens for the presentation of a report by the Research Investment Committee (RIC). «The Greek market is a very healthy investment opportunity,» said Hobson, adding that, although it does not have high-capitalization companies by European standards, it enjoys some of the advantages of the emerging economies, such as good returns, and is a mature market. Furthermore, Merrill Lynch believes that the local market’s cash flow will not be hurt over the next 12-18 months, he said, which is why the bank maintains a «positive view» of Greece. Regarding the international market, Merrill Lynch expects stocks and commodities to prove better than bonds during 2006. Particularly for gold, the bank sees a «very serious opportunity,» since it expects that commodity to rise as high as $650-700 in the next 12 to 18 months from $550 yesterday afternoon. Merrill Lynch also has the most aggressive forecast in the market about European interest rates, as it expects the European Central Bank (ECB) to raise them above 3.5 percent within six months, from 2.25 percent today. «We are proposing that more weight be given to stocks compared with bonds; we prefer the non-US stocks rather than US stocks for the first half of the year and we are forecasting a transition from value stocks to growth stocks,» the Merrill Lynch report states. It adds that «commodities have the potential to raise their value and clients must consider placing less weight on the dollar than on other currencies.» The bank’s report anticipates inflationary pressures due to growth in Asia and the regained ability of American and European companies to raise the price of their products. Although interest rates in Japan and the rest of Asia may move higher to tackle this situation, the rates of Asian currencies will remain low in real terms, rendering local stocks more attractive. The bank’s strategic analysts view positively any positioning in the stock markets of South Korea, Thailand, Taiwan and Japan, and they prefer any exposure offered by China’s dynamic growth to come through investing in regional companies active in China rather than directly in Chinese stocks. Merrill Lynch finally notes that the differences in valuation between growth stocks and value stocks as well as between high- and low-capitalization stocks have already begun to diminish, as have differences between US and non-US stocks. The bank’s analysts expect this trend to grow stronger within 2006. In a balanced risk strategy Merrill Lynch proposes the combination of high-capitalization growth stocks in the US (technology, health) with stocks from emerging markets in Asia.