Australia, Japan and US strongest among developed markets, says BNY Mellon

Apr 11th, 2012 | By | Category: Equities

The USJapan and Australia are expected to escape recession over the next 12 months, with the US economy now expected to expand by 2.9% over the period, according to a report from Mellon Capital Management, part of BNY Mellon Asset Management.

Australia, Japan and US strongest among developed markets, says BNY Mellon

Australia, Japan and US are the strongest among developed market economies, says BNY Mellon. The firm also favours the Australian Dollar.

Excluding the US, Japan and Australia, most developed countries are expected to experience a mild recession over the next year, with European countries at the highest risk, the report said.

“The US economy is continuing to strengthen and we now put the probability of anaemic US growth at less than 5%,” said Lex Huberts, president of Mellon Capital.  “This is a significant improvement from September, when the probability was closer to 20% that the US economy would grow at less than 2% over the next year.”

Mellon Capital generates its own proprietary measure of leading economic indicators (LEI), with an LEI level of slightly less than 100 indicating, in Mellon Capital’s view, a significant probability of a mild economic contraction.

FEATURED PRODUCTS

United States

SPDR S&P 500 ETF (5PX5)

Amundi ETF Nasdaq (ANXU)

Japan

Lyxor ETF Japan Topix (LTPX)

HSBC MSCI Japan ETF (HMJP)

Australia

DB X-trackers S&P/ASX 200 ETF (XAUS)

iShares MSCI Australia ETF (SAUS)

ETFS Long AUD Short GBP ETC (GBAU)

All major developed countries except Australia, Japan and the US currently have readings below 100.  Southern peripheral countries in Europe have the lowest LEI, but France, UK and Germany also appear weak, all below 99, signalling the likelihood of at least a mild recession, according to the report.

“Looking at our forward estimates of economic fundamentals, we are cautiously optimistic on stocks given the signs of economic recovery in the US, positive steps toward resolving the euro area debt crisis and the general stabilization of earnings forecasts in Europe,” said Huberts.  “However, tensions with Iran are a concern.”

The report also notes that Mellon Capital is moderately positive on commodities, favours emerging markets equities and favours the Australian dollar and Canadian dollar among developed market currencies at this time.

For UK-based investors looking to access the US, Japan and Australia, there are a number of London-listed ETFs to consider, tracking a range of different indices. Following is a selection worthy of further investigation.

United States

SPDR S&P 500 ETF (5PX5)
Tracks the ‘blue chip’ S&P 500 Index. The S&P 500 is a float-adjusted, market-capitalisation weighted index of the top 500 listed companies in the US. The index is designed to provide exposure to the large cap segment of the US equities market and spans over 24 separate industry groups. It captures approximately 75% of the market capitalisation of US equities. TER 0.15%.

Amundi ETF Nasdaq (ANXU)
Tracks the Nasdaq-100 Index. The Nasdaq 100 is a stock market index of 100 of the largest non-financial companies listed on the Nasdaq exchange. Constituent weights are based on their market capitalisations, with certain rules capping the influence of the largest components. Often seen as a proxy for high-technology stocks, major industry groups include computer hardware and software, telecommunications and biotechnology. TER 0.23%.

Japan

Lyxor ETF Japan Topix (LTPX)
Tracks the Tokyo Stock Price Index (Topix). The Topix includes all First Section (the market place for stocks of larger companies) listed shares on the Tokyo Stock Exchange. The index is free-float adjusted market capitalisation-weighted and currently has 1,665 constituents. TER 0.50%.

HSBC MSCI Japan ETF (HMJP)
Tracks the MSCI Japan Index. The MSCI Japan is a free-float adjusted market-capitalisation weighted index designed to track the equity market performance of Japanese securities listed on Tokyo Stock Exchange, Osaka Stock Exchange, JASDAQ and Nagoya Stock Exchange. The index covers 85% of the investable market. The index currently has 315 constituents. TER 0.40%.

Australia

DB X-trackers S&P/ASX 200 ETF (XAUS)
Tracks the S&P/ASX 200 Index. The S&P/ASX 200 covers the performance of the 200 largest and most actively traded Australian companies and represents approximately 78% of Australian equity market capitalisation. The index combines the S&P/ASX 100 and 100 additional stocks to cover beyond the large and mid cap segments of the Australian market. TER 0.50%.

iShares MSCI Australia ETF (SAUS)
Tracks the MSCI Australia Index. The MSCI Australia is a free-float adjusted market-capitalisation weighted index designed to track the equity market performance of Australian securities listed on Australia Stock Exchange. The index covers approximately 84% of the investable market currently has 67 constituents. TER 0.59%.

ETFS Long AUD Short GBP ETC (GBAU)
Tracks the MSFX Long Australian Dollar/GBP Index (TR) which aims to reflect movements in exchange rates between the two currencies (long Australian Dollar, short Pound Sterling), plus exposure to local interest rates. The ETC is a debt security issued by ETFS Foreign Exchange Ltd and is backed by Currency Transactions entered into with Currency Transaction Counterparties (CTCs). Counterparty risk is minimised by way of daily marked-to-market payments. TER 0.39%.

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