EUROPEAN MORNING BRIEFING: 21 agosto 2012

MILANO (MF-DJ)–I principali listini azionari europei dovrebbero aprire in lieve rialzo, mentre Bund e Gilt poco mossi. L’euro e’ in rialzo, il prezzo spot dell’oro sale e i future sul petrolio sono contrastati. Mercati azionari E’ attesa un’apertura dei listini azionari europei in lieve rialzo anche se permangono incertezze. Per Ig Markets il Ftse dovrebbe salire di 14 punti a quota 5838, i Dax di 2 punti a 7036 e il Cac di 7 punti a 3488. “Dopo il rally recente stiamo ora arrivando in uno stato dove c’e’ un po’ di incertezza sul prosieguo o meno di questo trend”, ha dichiarato Predrag Dukic, senior equity sales trader di Capital Markets. Secondo gli analisti di Charles Schwab & Co “il recente miglioramento del sentiment nella zona euro e’ ostacolato dalle notizie contrastanti in merito agli acquisti della Banca centrale europea del debito sovrano”. Nella giornata di ieri un portavoce della Bce ha definito “assolutamente fuorvianti” le indiscrezioni del Der Spiegel in merito a un possibile piano dell’Istituto di Francoforte per tenere sotto controllo i rendimenti sui titoli di Stato dei Paesi in difficolta’. “Ci devono essere dei cambiamenti strutturali di lungo termine su come l’Europa affronte la questione della crescita e del debito”, ha affermato Ernie Cecilia, chief investment officer at Bryn Mawr Trust Co., sottolineando come “tutto quello che abbiamo visto fino a questo momento non e’ stato sostenuto dalla volonta’ politica di farlo”. Valute L’euro e’ in lieve rialzo stamattina anche se il suo movimento sembra mancare di convinzione, in una giornata che si preannuncia volatile in vista dei possibili sviluppi della crisi del debito. Ieri la moneta unica ha prima subito la spinta positiva delle indiscrezioni di stampa che parlavano di un piano della Bce per porre un tetto sugli spread periferici, per poi calare in seguito alla smentita giunta da Francoforte. “E’ emblematico vedere come gli investitori scommettono sulle notizie”, osserva MacNeil Curry, a capo della strategia tecnica sui cambi e sui tassi di Bank of America-Merrill Lynch, aggiungendo che il mercato “tende ad essere molto volatile”. L’euro/usd quota ora a 1,2358 e, secondo la maggior parte degli analisti, dovrebbe rimanere senza direzione nel corso della settimana. Secondo Andrew Cox, forex strategist di Citigroup, la moneta unica si trova di fronte a due forze opposte: se, da una parte, il sentiment e’ migliorato da quando la Bce di Mario Draghi ha mostrato la volonta’ di fare quanto necessario per salvare l’euro, dall’altra la moneta unica rischia di essere indebolita da un’eventuale espansione del bilancio dell’Eurotower. La giornata di oggi sara’ scandita dalle aste spagnole di 3,5-4,5 mld euro di Letras a 12 e 18 mesi, oltre che dalle possibili indiscrezioni in arrivo dalla Bce e dalla Grecia. L’euro/yen e’ a 97,99, l’usd/yen a 79,28, l’aud/usd a 1,0481, il gbp/usd a 1,5726 e l’euro/gbp a 0,7856. Titoli di Stato Bund e Gilt dovrebbero aprire poco mossi con gli investitori che cercano di capire le reali intenzioni della Banca centrale europea in merito al programma di acquisto di titoli di Stato dei Paesi in difficolta’. In una nota, gli analisti di Danske Bank sottolineano come “alcune promesse potrebbero essere un importante passo in avanti per riguadagnare la fiducia degli investitori, ma la questione e’ se queste siano compatibili con le proibizioni dei Trattati (dell’Unione Europea), in merito al finanziamento monetario dei debiti sovrani”. La Banca centrale tedesca, ribadendo la propria opposizione, ha spento le speranze su un programma di acquisto titoli di Stato da parte della Bce ‘illimitato’. Nel proprio bollettino mensile la Buba ha affermato che qualsiasi condivisione dei rischi deve essere decisa dai parlamenti e quindi dai Governi. Per Predrag Dukic di CM Capital Markets “l’azione della Banca centrale non avra’ ancora luogo. I policy maker sono in vacanza e la Germania ha ribadito che ritiene rischioso un programma di acquisto bond”. Secondo l’esperto “l’autunno sara’ il periodo in cui la Bce e i politici potranno intraprendere azioni verso una soluzione permanente”, ma, continua Dukic “i mercati lo hanno gia’ dato per scontato”. I Treaury saranno in rialzo dopo il buon inizio e l’inversione di trend durante la giornata di ieri. Petrolio I future sul petrolio sono contrastati in Asia. Per gli analisti il greggio subisce l’effetto della smentita della Bce, della diminuzione delle scorte nel Mare del Nord e delle tensioni nel Medio Oriente. Il future sul Wti, con scadenza a ottobre, sale dello 0,21 a 96,46 usd/barile, mentre quello sul Brent, con scadenza a ottobre, dello 0,16% a 113,88 usd/barile. Oro Il prezzo dell’oro, secondo una nota di Azn, dovrebbe rimanere all’interno del range tra i 1.618 usd oncia e i 1.620 usd oncia, con i mercati che aspettano nuovi segnali di stimolo all’economia statunitense dalla minute del meeting del Fomc, che saranno pubblicate domani. Il prezzo spot dell’oro e’ a 1.622,33 usd/oncia.

Why “The Death of Equities” is a Gross Exaggeration

by Alexander Green, Investment U Chief Investment Strategist
Friday, August 17, 2012
Alexander Green

On August 13, 1979, BusinessWeek famously ran a cover article entitled The Death of Equities, arguing that investors should shun stocks due to concerns about the long-term health of the U.S economy.

The timing was less than auspicious. Within months, the stock market began the longest and most powerful bull market in U.S. history.

Earlier this month, Bill Gross, the co-founder and co-chief investment officer of Pacific Investment Co. (better known as PIMCO), argued in his widely-read blog that the “cult of equity is dying.”

Investors aren’t just buying his argument. They seem to have predicted it. How else do you explain the fact that they have yanked some $200 billion out of equity funds since January 2011?

These investors are making a huge mistake, especially if they’re plowing the proceeds into bond funds like Gross’s. Here’s why…

A Premature Autopsy…

Gross labels the high returns on U.S. stocks since 1912 a “historical freak,” one that won’t be duplicated soon. But grand predictions like these should always be taken with a grain of salt. Besides, there are a number of problems with his analysis.

The first is that Gross seems to be unaware that foreign markets have generated ultra-long-term returns very similar to those in the United States. (For a thorough historical analysis, read Jeremy Siegel’s Stocks for the Long Run, now in its fourth edition.)

The second problem with Gross’s premature autopsy is his insistence that corporate earnings cannot grow faster than the overall economy. Yet history shows no direct correlation between GDP growth and corporate earnings over the long haul. Although there is a strong correlation – in fact a causality – between corporate earnings growth and stock market performance. And please note we’re currently in a period of record corporate profits, record profit margins and record corporate cash on hand.

Pundits and bloggers have been quick to jump on Gross’s comments over the last couple weeks, some agreeing, others disagreeing.

A Great Contrarian Indicator

One of the voices you should listen to is Burton Malkiel, author of the investment classic A Random Walk Down Wall Street. In an op-ed piece in The Wall Street Journal this week he wrote, “Equities are more attractive relative to bonds than at any other time in history. Locking retirement funds into ‘safe’ 1.5%-yielding Treasury securities is likely to be a sure loser after inflation… The only hope – both for individuals and for institutions running retirement portfolios – is to increase, not decrease, the share of the portfolio devoted to equities.”

As in the old BusinessWeek cover, high-profile predictions like Gross’s are often great contrary indicators. This one may well precede another delightful rise in equities.

It won’t be an easy climb, of course. Stocks will always be a volatile asset, one that engenders queasy stomachs and sleepless nights. That’s simply the price you pay for earning returns much higher than cash or bonds.

This year is proving to be no exception. The S&P 500 is currently up 12% year-to-date and, with dividends reinvested, has more than doubled over the last three and a half years. If this is “the new normal,” sign me up.

In addition, when bonds start to sell off – as they will eventually – investors will realize they have made a terrible bargain. Hoping to accept low but positive returns in exchange for peace of mind, they will end up with neither.

If PIMCO didn’t have more than $1.5 trillion in fixed-income assets under management, perhaps that is what Gross would be warning investors about.

Good Investing,

Alex

MONEY WEEK AHEAD: Listening For A Pause In The Fed Easing Music

 By Cynthia Lin 
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–U.S. Treasury investors are increasingly doubting the Federal Reserve’s willingness to provide additional stimulus.

Despite renewed fears about the euro-zone debt crisis, recent gains in Treasurys have been modest. Those holding U.S. Treasurys are worried that come next week at the Fed’s April meeting, the central bank will disappoint by not referencing potential easing measures that could include a full-fledged bond-buying program or an extension of the current Operation Twist.

Easing options certainly still remain on the table, but it’s less certain now than a few weeks ago that the Fed will actually take the plunge. Today, investors are increasingly thinking the central bank won’t pump the tires of those expecting action.

“The end of Twist is around the corner, and the Fed will want to take pause until the last of the bond buying is done,” said Jeff Hussey, global chief investment officer of fixed income at Russell Investments. He sees an upward bias in Treasury yields and is opting to hold less Treasurys than that of his portfolio’s benchmark.

On Wednesday, after the Federal Open Market Committee’s two-day policy meeting, the Fed will publish its updated rate and economic forecasts, and Chairman Ben Bernanke will respond to questions from the press.

If the statement and Bernanke’s briefing shed no new light on potential easing, market analysts say bond investors will start gearing up for the end of Operation Twist, a stimulus effort scheduled to end in June. It involves the Fed selling short-dated Treasurys and using those proceeds to buy longer-term Treasurys in order to keep a lid on borrowing costs.

The impending end of “Twist” will put Bernanke on the hot seat Wednesday. Expectations for the Fed to offer more stimulus have declined since the March policy meeting, when policy makers came off somewhat more optimistic about the economy than before but didn’t take the possibility of further easing off the table.

With bond investors torn, 10-year Treasury yields are teetering around 2%, ready to break in either direction upon clearer guidance from the Fed.

“The press conference should be the most interesting part of the day,” says policy researcher Roberto Perli at the International Strategy and Investment group. “Bernanke could provide some important clues if reporters ask…about future policy, and they most likely will. The market could have some sizeable reaction.”

Strategists at Bank of America said to position for a selloff as the program winds down, seeing 10-year yields rising to 2.25%, from 1.959% late Friday. Interest-rate strategists at Barclays Capital recommend betting against three-year Treasurys to position for a potential hawkish surprise from the rate-timing forecast. As it stands, the Fed intends to hold the policy rate near zero at least until late-2014–this stance isn’t expected to change.

Not showing more inclination to provide more stimulus would be a slight negative for Treasurys since the Fed has become the largest single buyer in the market. Complicating the week, the Treasury Department is scheduled to sell $35 billion of two-year notes Tuesday, $35 billion five-year notes Wednesday and $29 billion seven-year notes Thursday.

“June is fast approaching, and there’s no doubt the Fed has really manipulated the Treasurys market,” said Jeffrey Elswick, director of fixed income at Frost Investment Advisors. “All else equal, yields can certainly move up on the long-end.”

Elswick’s funds are currently positioned for yields to tick a bit lower in the short term because of flight-to-quality buying driven by Europe, but then to climb steadily in the second half of the year.


-By Cynthia Lin, Dow Jones Newswires; 212-416-4403; cynthia.lin@dowjones.com

Pimco’s Gross Joined Treasury Bull Camp In January

 By Min Zeng 
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–Bill Gross, manager of the world’s biggest bond fund, entered the year 2012 with new mantra–Treasury bond bull.

Gross, co-chief investment officer at Pacific Investment Management Co., boosted Treasury bonds holdings for a fourth straight month in January at Pimco’s flagship $430 billion Total Return Fund (PTTRX). The holdings rose to 38% of the fund’s holdings in January from 30% in December, according to data released on the company’s website.

That was more than 35.23% required by the benchmark index–the Barclays Capital US Aggregate Bond Index–at the end of January, a sharp reversal from last year when at one time he completed dumped all of the fund’s holdings of Treasurys.

After ill-timed bets early last year wagering on price declines in Treasurys, Gross has reversed his strategy over the past few months by buying Treasurys and mortgage-backed securities. The moves reflected his views that the Federal Reserve’s unconventional monetary-stimulus programs would keep bond yields, which move inversely to their prices, at relatively low levels.

Meanwhile, Gross raised the fund’s holdings of mortgage-backed securities to 50% in January, from 48% in December, 43% in November and 38% in both October and September.

Mark Porterfield, a spokesman of Pimco, said the company doesn’t comment on fund holdings.

Tom Roseen, research analyst at Lipper, said the buying in Treasurys signaled Gross fixed his mistake and adjusted his strategy.

But Roseen added that for coming months, Gross would be better off keeping Treasury holdings close to the benchmark rather than a significant overweight stance because Treasury yields trading at such meager levels have little room to fall further. Bond prices rise when yields fall.

“He may stand pat on Treasurys and make nimble moves in picking high-quality assets outside the Treasury market to get return,” he added.

Indeed, after posing a near 10% return last year, Treasury bonds have handed investors a loss of 0.4% this year through Wednesday, according to data from Barclays.

But the fund’s performance showed Gross’s strategy in buying Treasurys and MBS has worked well so far.

Gross’s fund handed investors a return of 3.46% this year through Wednesday, beating the 0.55% on the Barclays Capital US Aggregate Bond Index. In 2011, stung by the sour bets on Treasurys, the fund posted a return of 4.16%, far below the 7.84% result for the benchmark index.

Pimco, part of Allianz SE (ALV.XE, ALIZF), is one of the world’s biggest asset-management companies, with more than $1 trillion in assets under management.


-By Min Zeng, Dow Jones Newswires; 212-416-2229; min.zeng@dowjones.com


			

SNB WATCH:Insider Likely New Director As UBS Poaches Candidate

By Neil MacLucas

Of DOW JONES NEWSWIRES


ZURICH (Dow Jones)–The Swiss National Bank’s list of potential contenders to replace former president Philipp Hildebrand narrowed this week after UBS AG nominated Beatrice Weder di Mauro to its board and Swiss chief government economist Aymo Brunetti took up an academic post, making an insider appointment even more likely.

Switzerland’s largest bank Friday said it has proposed Di Mauro, a Swiss economist who sits on the German council of economic experts, or ‘wise men,’ for election to its board in May. Brunetti resigned from the Swiss economics ministry to become a professor at the University of Bern, effective this month.

Di Mauro and Brunetti were among the favorite outsiders to replace Hildebrand, who quit after a controversy involving a currency transaction he says was made by his wife.

This makes it even more likely that a Swiss central bank insider will be promoted, with the spotlight firmly on Thomas Moser, currently an alternate director of the department that oversees international and economic affairs.

Moser, who joined the SNB in 1999, may have an advantage. He spent three years up to 2004 working with the Swiss mission at the International Monetary Fund in Washington and returned as an IMF director in 2006. Moser was made an alternative SNB director in 2010.

“Thomas Moser has a very good chance of being appointed, not so much because he’s an insider, but rather due to his international experience and connections,” said Thomas Stucki, chief investment officer at Hyposwiss Private Bank.

Another insider thought to be in the running is Dewet Moser, also an alternative director. His ‘hands-on’ management of the SNB’s currency and money market operations since 2007 could boost his chances, analysts said.

The third possible internal candidate is Thomas Wiedmer, interim president Thomas Jordan’s present deputy who helps run the SNB’s financial system’s unit, responsible for banking supervision.

Looking beyond the SNB, local media have pitched Fritz Zurbruegg, head of the government’s finance directorate, and Joe Ackermann, the Deutsche Bank AG chief executive with Swiss roots.

While Jordan said the central bank is fully functional and will continue to defend its cap on the franc, which it introduced in September under Hildebrand’s leadership, it may take several weeks before a decision is made.

The SNB’s Bank Council submits a recommendation for the third governing board member, it is the Swiss federal council, or government, which has the final say.

Swiss Finance Minister Eveline Widmer-Schlumpf said last month it could be March or April before an appointment is announced, and Stucki, who previously worked at the SNB, said “things have gone very quiet on the issue of a successor [to Hildebrand].”

“The internal candidates are probably in pole position, but the government is probably casting its net fairly wide, which might take a bit longer, although the SNB is functioning well, and there is no time pressure on them,” said David Marmet, senior economist at Zuercher Kantonalbank.


-By Neil MacLucas, Dow Jones Newswires; +41 43 443 8046; neil.maclucas@dowjones.com

TIP SHEET: American Beacon Fund Takes Long View On Stressed Stocks

By Andrew R. Johnson 
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–Last year was crummy for most bank stocks, but that didn’t stop the American Beacon Mid Cap Value Fund (AACIX) from investing in financials and other stocks hit by the housing market, beating its peers in the process.

One of the fund’s largest holdings, Fifth Third Bancorp (FITB), illustrates the fund managers’ strategy of finding cheap stocks with room to run.

That often means picking companies that have had earnings growth “derailed” by some factor, such as a shift in customer behavior or, in the case of Fifth Third, broader market upheaval, said Richard Pzena, founder and co-chief investment officer of Pzena Investment Management, one of three subadvisers for the fund. The key is determining whether current stress facing a stock is temporary or permanent, and whether a company has a sustainable strategy to combat the challenges, Pzena said.

“The only thing we invest in are things that are counterintuitive,” Pzena said. “I can’t think of a stock that we’ve ever bought that wasn’t counterintuitive.”

Fifth Third, like other regional and big-bank stocks, faced a sluggish lending environment in 2011, which has made it difficult to grow revenue for most lenders. Fifth Third held up better than others, though, thanks in part to its expense controls and improving credit quality, said Adriana Posada, senior portfolio manager for American Beacon Advisors.

The stock also demonstrates the fund’s approach to sector allocation.

“Sector allocation is a by-product of…stock selection, and every stock is purchased on its own merits and researched from the bottom up,” Posada said. In addition to financials, the fund also has large holdings in technology and industrial stocks.

Established in 2004, the American Beacon Mid Cap Value Fund has $89.2 million in assets. As of Monday, the fund was up 3.16% over the last year, beating its category by 2.80 percentage points, according to Morningstar. Over the last three years, the fund has posted an annualized return of 25.11%, 2.82 percentage points above its category.

“They made some good stock calls,” said Todd Rosenbluth, a mutual fund analyst with S&P Capital IQ. He said the fund takes a longer-term view than some of its peers.

“It’s a fund for someone who wants a more longer-term investment horizon that looks for higher-quality returns,” Rosenbluth said. “What it’s not is a fund that will look for low-price opportunities and get out [immediately] and try to find the next low-price opportunity.”

While focusing on stocks that are trading at a discount to book value is key, the fund also wants stocks that are expected to surpass their peers, Posada said.

“It’s not just a portfolio of cheap stocks, it’s a portfolio of cheap stocks that our managers expect will be growing faster than the market,” Posada said.

Sherwin-Williams Co. (SHW), among the fund’s holdings, faces a shaky housing market and cautious consumers. But the paint maker’s tight relationships with building contractors allows it to charge premium prices for paint, and as consumer sentiment bounces back, it stands to benefit, Pzena said. Sherwin-Williams was up 14% over the last year as of Monday.

Pzena also likes Molson Coors Brewing Co. (TAP). While there is some concern that beer consumption is declining, Molson Coors is consolidating globally to increase its cost and distribution efficiency.


(Andrew R. Johnson covers consumer lending for Dow Jones Newswires. He can be reached at 212-416-3214 or by email at andrew.r.johnson@dowjones.com.)

Slower growth or not, investors shun China at own risk

By Steven C. Johnson
NEW YORK, Jan 18 (Reuters) – Like most people in finance, Karl Schamotta has heard the stories about Chinese ghost cities — vast condominium complexes built during the country’s investment boom but barely lived in. “A client who runs a large retail chain was there recently,” said Schamotta, who helps corporate clients manage currency risk at Western Union Business Solutions. “One night he looked out his hotel room window and saw a landscape filled with condosbut only two lights on. It was 9 at night.”

For many, such anecdotes are signs China’s government-directed investment and credit booms have gone too far and that much slower growth or even a property crash awaits the world’s No. 2 economy. But with growth in advanced economies still painfully slow, investors say they can’t afford to turn their backs on China altogether. Most acknowledge that the years of 10 percent growth or better may be over. They’re just not willing to bet the Middle Kingdom will go from boom to bust overnight.

“Yes, on the whole, there are concerns about China,” said Samarjit Shankar, director of global FX strategy at BNY Mellon in Boston. “But when it comes to investment opportunities, sometimes youhave to pick the least of several evils.”

Some portfolio managers even noted that a 20 percent drop in major stock indexes in China and Brazil last year make emerging market equities even more attractive.

According to fund tracker EPFRglobal, emerging market equity funds absorbed $1.84 billion in the week ending Jan. 11, nearly a third of all new equity investments and the first inflow since November.

“We’re concerned about the economies but we like the markets, which aretrading at a huge discount to the U.S.,” said Jack Ablin, chief investment officer at Harris Private Bank.

“China is entering a risky period and it’s hard to know how it will play out,” he said. “If I could buy emerging markets ex-China, Iprobably would. But valuations are such that we’re going to hold our nose and buy it too.” <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic: http://link.reuters.com/ruc26s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
GRADUAL SLOWDOWN OR CRASH?
For investors who still want exposure to China, sticking to their guns has become harder amid all the talk of coming doom.

Jim Chanos, president of $6billion hedge fund Kynikos Associates and a long-time China skeptic, has been predicting a hard landing for years, warning that Chinese banks are buried in bad loans that they may not be able to absorb.

In late 2011, he told Reuters that China’scomeuppance for letting a real estate bubble form was “already happening,” comparing a 40 percent annual drop in apartment sales to the sorts of declines that preceded crashes in Florida and Nevada.

Data this week showed China’s economy grew atits slowest pace in 2-1/2 years in the fourth quarter while annual growth fell to 9.2 percent from 10.4 percent in 2010. (news)
The nightmare scenario would involve the economy suddenly slowing to a 5- or 6-percent growth rate. Whilethat would still outpace the West, it would threaten China’s ability to keep its urbanizing population employed and could spark social unrest.

It would also have a major impact on global growth, especially for providers of energy and rawmaterials, at a time when the world is depending on emerging markets to stoke demand.

In a November report, Japanese securities firm Nomura predicted a one-in-three chance of a hard landing, which it defined as an abrupt slowdown to 5 percentgrowth for at least one year, by the end of 2014.

“If China has a hard landing in the next few years, that will hurt everyone, said David Woo, head of global rates and currency research at Bank of America-Merrill Lynch. “It will cancel out anypositive effect from stronger U.S. growth.”

But things might not be that gloomy.

For one thing, with some $3 trillion in currency reserves, China has flexibility to cushion the impact of any slowdown. What’s more, the central bank hasplenty of room to cut interest rates and has already slashed bank reserve requirements.

Others point to an impending leadership change in late 2012, noting that Beijing will do whatever it takes to ensure there is no economic turmoil to hinder asmooth transition.

“We don’t believe 2012 is the year we see sub-6 pct growth in China,” said Luz Padilla, manager of DoubleLine’s $750 million Emerging Market Fixed Income Fund, part of the $22 billion overseen by the Los Angeles-basedinvestment firm. “We think it moderates but remains robust at just over 8 percent.”

That’s why Marc Doss, regional chief investment officer at Wells Fargo Private Bank, with assets worth $157 billion, said investors will rue getting too bearishtoo soon.

He said a portfolio that mixes emerging market stocks and bonds with U.S. municipal and high-yield debt and global dividend stocks could return up to 3 percent.

That compares favorably with the S&P 500′s flat return in 2011 or the sub-2 percent returns on offer from 10-year U.S., German, Japanese or British government bonds.

“A 10-year Treasury at 2 percent or under is a losing proposition,” he said. “With inflation, you’re already losing. If you just look at a simplebasket of emerging market equities, the dividend yield is higher than the 10-year Treasury.”

HEDGING BETS
Of course, most investors do expect the pace of growth to slow over the next several years, which is why Padilla said she takesprecautions by making sure Chinese fixed income holdings are concentrated in investment grade corporate debt. Among other things, that weeds out exposure to the property sector.

Across emerging markets, she said she sticks to dollar-denominateddebt, which should offer some protection if Europe’s crisis worsens, sparking slower world growth and a global rush into the safe-haven U.S. dollar.

“We were getting calls almost every day from investors, asking why we aren’t in emerging marketcurrency debt,” she said. “While I agree that in the long-term that’s probably a winning position, what people miss is the risk argument.”

To offset his positions in emerging market stocks, Harris Private Bank’s Ablin said he had reduced exposure to commodities in general and industrial metals in particular.

Schamotta said he has started advising clients to tread carefully in China, and advises liberal use of options and forward contracts to lock in favorable rates in the yuan or currencies of countries like Australia, where growth is closely tied to the strength of the Chinese economy.

But he’s not expecting too many to bail out entirely.

“The psychology of the typical chief financial officer or investor reminds meof that line about musical chairs,” he said. “They have to keep at it as long as the music’s playing.”

(Editing by Chizu Nomiyama) Messaging:steven.c.johnson.reuters.com@reuters.net)