Pohjola's analysts: Is strengthening economic growth already reflected in prices?

The world economy is continuing its gradual improvement, with economic growth in developed countries, in particular, speeding up and growth in emerging economies speeding up only slightly. The speed-up has relied on the accommodative monetary policy, but strengthening growth would also enable a less accommodative monetary policy stance. - The positive economic sentiment in the USA and the world economic recovery will support risk-taking and so we are still taking a positive view of equities and especially High Yield corporate bonds in the bond market, state the analysts. - The stock market rally has substantially raised market valuations. We think, however, that improved risk sentiment, expectations of accelerating global economic growth and weak returns on alternative investments justify the overweight equity allocation. We now favour sectors with a combination of potential for markedly improved earnings performance and reasonable valuation. Such European sectors include the automobile industry, household goods and technology. Industrial goods and services also have potential as the world economy is recovering, although valuation ratios are still high, says Jarkko Soikkeli, Equity Strategist. - Our favourite Finnish stocks for early 2013 include Cargotec Corporation, Metso Corporation, Metsä Board, Nokian Tyres Plc and Uponor Corporation. At the same time, we recommend avoiding the following stocks: Elisa Corporation, Tieto Corporation, UPM-Kymmene Corporation and Wärtsilä Corporation, continues Soikkeli. That the US and UK economic picture remains upbeat will support the expectations of Pohjola's analysts that investors bring forward expectations for when the Fed raise the key rate. The euro-area yield curve is in line with the current view of the analysts. According to the analysts, the recommended duration in the euro area is still five years. - We expect the US dollar to strengthen against the euro when the Fed is under higher pressure to raise the key rate. We anticipate that emerging economies will strengthen in the global economic slipstream, but the emerging economies' currencies are still waiting to see an improvement as a result of the Fed's pressure to raise its key rates. The accelerating inflation rate in the USA and the accelerating global economic growth will support investment-led recovery in the commodities markets. In Europe, price prospects for electricity, coal and emissions allowances are anaemic, says Jukka Ruotinen, Head of Fixed Income and FX Research. - In the current market environment, we favour High Yield corporate bonds more than Investment Grade bonds because of their higher risk premium potential and a better hedge against interest rate movements. In terms of company fundamentals, we see corporate bonds issued by the following Finnish companies as the most valuable: Cramo Plc, Nokian Tyres plc, PKC Group Plc, Ramirent Plc and Tieto Corporation. In our view, the yield of corporate bonds issued by Elisa Corporation, Neste Oil, Nokia Corporation, NSN and SRV to the least attractive in relation to corporate credit rating, continues Ruotinen. For more information, please contact: Jarkko Soikkeli, Equity Strategist, tel. +358 (0)10 252 8685 Jukka Ruotinen, Head of Fixed Income and FX Research, tel. +358 (0)10 252 2792 Pohjola is a Finnish financial services group which provides its customers with banking, non-life insurance and asset management services. Our mission is to promote the sustainable prosperity, security and wellbeing of our customers. Profitable growth and an increase in company value form our key objectives. Pohjola Group serves corporate customers in Finland and abroad by providing an extensive range of financial, investment, cash- management and non-life insurance services. We offer non-life insurance and private banking services to private customers. Pohjola Series A shares have been listed on the Large Cap List of the NASDAQ OMX Helsinki since 1989. The number of shareholders totals around 32,000. Pohjola is part of OP-Pohjola Group, the leading financial services group in Finland with over four million customers. This announcement is distributed by GlobeNewswire on behalf of GlobeNewswire clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Pohjola Pankki Oyj via GlobeNewswire [HUG#1757170]