12th December 2014
The FTSE has fallen for the fifth day in a row with the blue chip index down 5% over the week.
Markets have been concerned with the recent slump in oil prices, which have fallen from $115 a barrel in June to $63 today.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: ‘The FTSE 100 has fallen again for the fifth day in a row. It currently stands at more than 5% down over the week a markets mull the question of whether a lower oil price is a symptom or a cure for weak global demand.’
Khalaf said the answer is ‘probably both’ but expected the ‘restorative qualities’ of a drop in oil prices will take tie to feed through and therefore the markets are currently focusing on the negatives.
He said the oil price drop was ‘effectively a huge stimulus package of $4 billion a day, delivered directly to the pockets of oil consumers’.
‘This should be positive for global growth. The International Monetary Fund reckons a 10% drop in the oil price improves the global economy by around 0.2%,’ said Khalaf. ‘Since we have seen more than a 40% drop in price, this would mean around 0.8% added to the global economy.
Khalaf said the fall in oil prices could benefit investors if they pick the right regions to invest in.
‘Europe, Japan, China and India are heavily reliant on fuel imports and so stand to benefit accordingly from the lower oil price. The first three also look relatively cheap by historical standards,’ he said. ‘India doesn’t look hugely expensive, but it has enjoyed a very good 2014.’
Investors looking for exposure to Europe might consider Sanditon European, said Khalaf, as ‘manager Chris Rice aims to correctly identify when the next stage of the business cycle will arrive, and the types of companies that will prosper, positioning the portfolio accordingly’.
For those looking to invest in Japan, GLG Japan Core Alpha run by Stephen Harker is a good play, said Khalaf. Harker is a ‘contrarian investor hunting for value among Japanese large cap companies’.
The First State Asia Pacific Leaders fund is for those who want exposure to China.
‘The cornerstone of the success of fund manager Angus Tulloch is his conservative investment approach in a higher risk area of the world,’ said Khalaf.