MSV seminar for intermediaries examines market prospects for 2010

Life assurance company Middlesea Valletta Life recently held a breakfast seminar for its financial intermediaries and Bank of Valletta's savings and investment officers to review the markets in 2009 before considering investment opportunities for this year.

Chief executive officer David Curmi explained that MSV was keen to help all intermediaries keep abreast of developments in the international and local financial markets, particularly considering the volatility experienced over the past 18 months.

Stuart Fairbairn, general manager of Growth Investments, a Middlesea Group subsidiary, provided an economic background to the global economy, explaining the world's GDP had contracted by 0.8 per cent in 2009. There were divergences across regions, with developed economies decreasing by 3.2 per cent and emerging economies increasing by 2.1 per cent. China was the standout economy with a GDP growth of 8.7 per cent that was projected at 10 per cent this year.

Emerging economies in general were expected to grow by six per cent in 2010.

In 2009, stock markets around the world followed a common trend, decreasing in the first three months before staging dramatic recoveries. The FTSE All World index fell 24 per cent to March before recovering by 75 per cent at the end of the year. Different performances were noted between various countries, with the Chinese stock market increasing by 114 per cent as compared to the S&P500, which grew by 25 per cent.

Valletta Fund Management head Mark Vella explained the MSE index fell by 16 per cent in the first three months last year before rebounding to end the year with a 7.4 per cent gain.

Middlesea Insurance chief investment officer Marzena Formosa pointed out how massive quantitative easing and low interest rates helped bolster liquidity in the markets, leading to strong performance in fixed income investments. The best performing bonds in 2009 were high yield, as appetite for risk returned, although investment-grade bonds also performed very well.

In currency markets the euro strengthened against all major currencies with the exception of sterling, which was explained by sterling's weakness before 2009.

Middlesea Valletta Life actuary, Jonathan Kemp explained the workings and rationale of the MSV With Profit Fund and how it can play a role as part of a well-diversified investment portfolio.

Mr Fairbairn said that the general consensus among fund managers indicated that equities would outperform cash and bonds over the next six to 12 months. Emerging market equities would be the strongest performers. In the fixed income sector, government debt offered very limited opportunities, however high yield and emerging market debt still offered upside potential.

"Time in the market is better than timing the market," he said, reminding intermediaries that regular savings plans offer clients the chance to benefit from volatile markets by purchasing more units when prices are depressed, a process known as pound cost averaging.

Middlesea Valletta Life plans to run quarterly investment updates for its intermediaries and employees.