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Never mind Trump or Brexit, go out and bargain-hunt, Kleinwort Benson says
November 16, 2016 / 1:11 PM / a year ago

Never mind Trump or Brexit, go out and bargain-hunt, Kleinwort Benson says

LONDON (Reuters) - The bull market in bonds has further to run and many stocks are undervalued so investors should stop worrying about Trump and Brexit and go into the market and find bargains, the chief investment officer at wealth manager Kleinwort Benson said.

Mouhammed Choukeir, CIO at Kleinwort Benson, speaks during the Reuters Global Investment Outlook Summit in London, Britain November 16, 2016. REUTERS/Luke MacGregor

A pessimistic mood in the markets following the shock vote for Brexit and for Donald Trump as U.S. President creates buying opportunities, Mouhammed Choukeir, chief investment officer at the wealth manager told the Reuters Global Investment Outlook Summit.

“I struggle to find optimists - and that’s a reason to be optimistic ... our message is don’t be too concerned by the political noise,” said Choukeir, who manages 5.4 billion pounds ($6.71 billion) of assets.

Stock markets in peripheral Europe, Canadian banks and government bonds were among assets Choukeir liked, he told the summit held at Reuters’ office in London.

He pointed to the gloomy mood a few years ago when many commentators predicted the break-up of the euro zone and even a risk the United States could default on its debt.

“If I were to roll the clock back five years and told you – there was going to be a Greek crisis, EU crisis, the end of the euro was imminent, that Brexit would happen, that this businessman with radical ideas was going to be president and the U.S. was going to have a shutdown ... everybody would be saying we’ll just hoard cash,” he said.

“But that would have been the wrong decision because over that five-year period, equity markets have generated huge returns. And so has real estate, and so have commodities, and so have bonds.”

Choukeir said Trump could “turbo-charge” the U.S. economy with an increase in spending, while inflation was already largely priced into bonds in Britain and the United States, meaning the 35-year bond bull run was not yet over.

“Bonds at current yields still offer good income,” he said.

Mouhammed Choukeir, CIO at Kleinwort Benson, speaks during the Reuters Global Investment Outlook Summit in London, Britain November 16, 2016. REUTERS/Luke MacGregor

“For the bubble to burst ... you’ll need to see inflation stay at elevated levels for a very long period.”

In stock markets, Choukeir pointed to relative undervaluation in peripheral European stock markets such as Spain and Italy, while Germany, Europe’s largest economy, was also attractive.

“It’s an incredible economy, so resilient against all the shocks we’ve had.”

Slideshow (5 Images)

Economic data had also surprised on the upside in Britain after the Brexit vote, where Choukeir said London-listed multi-national companies were appealing.

Globally, banks are coping well with the low to negative interest rate environment, Choukeir said, highlighting Canadian banks as having robust balance sheets and high-quality earnings.

The tech sector should also be trading at higher multiples, Choukeir said, pointing to “transformation” in the sector through artificial intelligence and fintech.

He said he liked the dollar due to the prospect of U.S. economic stimulus and also favored a diversified range of undervalued emerging market currencies.

But he said Kleinwort Benson had exited Britain’s commercial real estate market months before the Brexit vote triggered a freeze in 18 billion pounds of UK real estate funds.

“Euphoric” views about the sector prompted the decision to sell, he said.

“When something is as risky as real estate and people are saying it’s safe - that causes concern.”

Additional reporting by Ritvik Carvalho and Helen Reid. Editing by Jane Merriman

Our Standards:The Thomson Reuters Trust Principles.
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