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Euro-$ war looms; risk-averse money managers seek to steer clear of emerging markets

A majority of global investors believe that the Euro will be a strong currency to challenge the dominant character of the US dollar in the world currency markets.

According to a survey conducted by the Deutsche Bank covering about 200 money managers from North America, Europe and Asia, investors were optimistic about the impact of European Monetary Union in fuelling the growth of the Euroland corporate market where the Euro would increasingly rival the US dollar as the global issuance currency of choice.

However, in the aftermath of the Russian rouble devaluation and the subsequent widening in credit spreads, there was a clear reduction in enthusiasm for both emerging markets and high-yield bond investments reflecting increased risk aversion amongst money managers, the study revealed.

In terms of regional highlights, US investors were more optimistic about the potential growth of the Euroland Corporate Bond market than their counterparts in Europe and Asia Pacific. Investors in the UK are more sceptical about Britain joining EMU before 2003 than investment managers inside the Euroland, North America and Asia pacific regions.

The majority of money managers were satisfied with their preparedness for EMU. However, when asked whether they had made any changes to their investment process in anticipation of EMU, there was a notable difference between Euroland (64 per cent of investors have adjusted) and the UK-based investors (only 38 per cent had made any change).

As per the timetable for EMU, in two months, the adoption of the Euro will create the second largest economic region and capital market in the world.

UNI

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