The monthly Wealth and Investment Management flagship Barclays, research report titled “Compass” focuses on providing investment advice and recommendations to investors across the globe. The report highlights that
The report revealed that large corporations have record-high cash balances, are having trouble generating revenue growth organically, and have the benefit of interest rates that are near all time Lows. As a result, expectations for M&A activity in 2014 look decidedly more optimistic than recent years.
“There are certainly challenges to overcome, but there are also very compelling reasons for CEOs to consider putting cash to work in the near-term given the macro environment. Though corporate cash balances have been high for years, in the second quarter of 2013 they reached a new all-time high. As we turn to 2014, the stage is set for an increase in deal making,” Benjamin Yeo, Chief Investment Officer, Asia and the Middle East, Barclays, said.
The report also focuses on the growing role of US small and medium sized businesses. SMEs tend to operate more locally; as a result they derive their revenues from surrounding communities which recently witnessed a decrease in the jobless rate and an increase in consumer confidence.
“SMEs are potential targets for large corporations seeking to grow their business. As SMEs have successfully managed to grow their revenues through driving earnings growth with top line increases, investors could benefit from an increase in M&A activity through owning the stocks of small and mid-sized companies, which are the targets of cash-rich large acquirers.”
The report also suggests that Central and Eastern European assets have unexpectedly been star performers in emerging markets this year. Barclays’ strategists are constructive on their equities, but would be selective on currencies. Domestic factors suggest stable bond markets, external shocks permitting.
“Our strategists are tactically neutral on emerging stocks as an asset class, but this could be a good time to start building long-term positions, most suitably for most clients via actively-managed emerging market funds.”