No silver lining for funds as dark cloud of rising inflation looms |
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Thu, 21 Apr 2005 01:00
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LONDON: After an unprecedented dive on Monday, which caused analysts to predict bleak prospects, the FTSE 100 index has slowly but surely shown signs of bouncing back with a marginal rise as the week progressed.
Even the US corporate difficulties and the home inflation could not hold back this rise in the index. Consequently, buyers have concluded that the UK equities are not yet out of reckoning and that they could still net themselves a bargain or two.
| It is pretty obvious that the bonds and real estate no longer seen promising to investors and hence even though the managers gave Merrill Lynch a scare when they conducted their latest survey, the equity market appears set to bounce back with a vengeance. The market received a much needed boost when Santander announced that it will chuck the entire real estate portfolio built up within Abbey’s fund management business. The bank cites a bloated management time and expense as the reason for this move. It also talk of investing a major chunk in the Real Estate Investment Trusts, those products which could be high on the next government's agenda. This focus should become a reality as the Royal Institution of Chartered Surveyors, has put in another appeal to the government that they entail some sort of legislation, which could allow investors to invest in a mixed portfolio of property, without having to shell out hefty taxes.
But even as the government continues to maintain a rubicund outlook on the prospects of the economy, fund managers are worried about the rising inflation and predict that the outlook for corporate profits appears bleak.
The latest figures show that the inflation has moved up several points in the last month to 1.9 per cent. However, even this need not scare investors away. The main thing that is causing this desolation in the funds market is the upsurge in the oil prices. But the market has managed to maintain an acceptable growth rate despite the energy problem. With the oil prices set to zoom up in the near future, it remains to be seen for how long the funds continue to float.
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