Crisis not over, reveals global survey

PETALING JAYA: While recent economic data point towards signs of recovery that help to fuel rally in the equity markets, a global survey, however, reveals that two thirds of fund managers reckon the financial crisis is not over."Anecdotal evidence gathered during the survey suggests investors across the globe are still concerned that the amount of leverage in the (financial) system that caused the original problem has not been reduced," said president and CEO of FTI Consulting Inc's Jack Dunn commenting on the survey result."The prevailing view is that there has been so much economic stimulus that markets cannot help but go up. The concern is what would happen when government money runs out.

These findings suggest a paradox, in that despite the negative outlook, global equity markets have rallied significantly in recent months. This indicates a willingness of investors, for now at least, to focus on factors beyond the fundamental issues that caused our current economic crisis."The survey of more than 153 leading institutional investors revealed that 64% of the respondents globally said they did not believe that the financial crisis was over, with 31% saying the crisis was over, and 5% undecided.Investors from the UK, US and Australia are the most pessimistic with 73%, 76% and 80% of investors, respectively, believing the crisis has not ended. Meanwhile, Continental European and Asian investors are slightly more optimistic with 59% and 62%, respectively, saying the crisis was not over."Clearly, the majority of funds surveyed do not believe the financial sector has recovered since the pinnacle of collapse in September 2008.
The sentiment is reflected across all regions, with the US, UK and Australian investors the most pessimistic, Dunn said in the statement."In Continental Europe and Asia, there is more optimism, but a significant majority still do not believe the financial sector is back on track," he adds.

The global survey was conducted by FTI Consulting Inc, which is a global business advisory firm dedicated to helping organisations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. Some 21% of investors surveyed are based in the UK, 20% are based in the US, 21% based in Asia, 34% based in Europe, and 4% based in Australia.

Dunn said the findings reflected ongoing uncertainty in world markets and highlighted challenges that would be faced by world economic leaders at the upcoming G-20 summit in Pittsburgh.He pointed out that among US companies alone, approximately US$163 billion (RM570.5 billion) of corporate speculative grade debt is due to mature in 2010, with approximately US$266 billion set to mature in 2011, according to Standard & Poor's research."These enormous financing requirements amid still-fragile credit markets, and weak demand apart from government stimulus, put a premium on a company's ability to effectively manage both public perceptions and the underlying business," he adds.Considering the economic uncertainties and weak credit markets, Dunn said companies would have to look at alternative funding avenues, such as sovereign wealth funds, the equity markets, or more exotic capital raisings. And for policy makers, it has meant reassessing the regulatory environment and executive incentives that have driven the market for many years.