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UK investors believe economic recovery will be short lived

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UK investors believe any economic recovery will be short lived, with the majority of investors positioning their portfolios in preparation for a W shaped recession, according to a survey by iShares.

The survey, which collated over 200 responses for each question, asked ETF investors to consider answers relating to some of their key investment challenges.

It found that 61 per cent believe the recovery will take the shape of a W as opposed to a U or a V, and 78 per cent think the emerging markets will come out on top at the end of the recession versus the west.

A further 55 per cent think they should still be overweight on defensives as opposed to cyclical stocks and 90 per cent believe corporate bonds are pricing in a recession followed by a recovery rather than just a depression.

Finally, 63 per cent think inflation will rise in 2010.
 
Nizam Hamid, head of sales strategy for iShares in Europe, says: “After finding out the thoughts of investors, we can see it clearly reflects their selection of ETFs and trends in asset flows. For example, over the past 12 months, an interesting trend has been the strength of flows into emerging market countries which have totalled EUR2.2bn compared to flows of EUR1.8bn into developed market countries, in the exchange-traded product space. Fixed income has become firmly established as an important asset class and the key area for asset gathering in fixed income remains corporate bonds, seeing inflows of EUR3.3bn over the past year. Furthermore, in the past six months, inflation linked ETFs have attracted EUR1.1bn of assets as investors consider the risks to current price stability. In addition, we’ve also seen a shift towards more defensive sectors such as utilities."

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