Investment Comments 27 August 2012

You cannot trust people who have such bad cuisine. Britain is the country with the worst food after Finland. French ex-president Jacques Chirac. 04 July 2005

Many of the world’s leading and most successful companies are listed in London.

European Countries (including Finland) with strong economies are beginning to lose their patience with the over generous treatment of the weaker southern European countries. Forget Berlin and Paris, watch what is happening in Helsinki.

Corporate bonds are at last being seen as investable. Companies that have found themselves unable to borrow from their banks are now raising funds directly from the financial markets. High quality corporate debt issues in the USA, Europe and Asia are interesting, and offer excellent yields from high quality borrowers.

Avoid those investing in bank debt; the crises in this sector are not yet over.

European Economic results have been poor, yet not all of Europe is facing weaker results. German companies are concerned that important customers in the Olive Oil States will be buying less in future. Northern Countries with Germany at the centre are still performing strongly. It is market sentiment and politicians facing an election that are driving prices down and there is no need to sell existing German investments.

In China, the central bank is trying to reduce inflation by limiting growth. But there is still growth in Chinese demand and demand in China and Asia / ASEAN will continue to grow.

Many excellent companies are paying dividends to their shareholders. The equities of these companies are in turn becoming more attractive. Funds specializing in these companies are likely to offer excellent long term growth prospects.

Demand for raw materials is likely to strengthen again. Reducing growth does not mean that there is no demand for raw materials, or indeed for companies that produce, process and transport them. Investor sentiment has weakened this sector, but confidence is returning.

Funds to watch.

Caution Indian Equities. Political corruption and stalemate leaves no room for growth at present.

Southern European government sector companies and banks. Uncertainty is too great.

Banks and Financial Companies. There could be more expensive embarrassment still to come.

Government Bonds. Do you really want to give the government your money for nothing?

Hold: German Equities. The markets are being talked down but the companies are strong.

Interest: South East Asia, especially Indonesia. Individual counties have their own personalities. Some risks are higher than others.

Companies that pay dividends to their shareholders. Even in difficult times, these Equities are a sound investment.