Impact of financial crisis seen to persist in 3-5 yrs

MANILA, Philippines–THE global capital markets are seen headed for another turbulent ride this year and the fallout may even linger in the next three to five years, according to the latest global market sentiment survey of the CFA Institute.

The CFA Institute runs the graduate-level self-study Chartered Financial Analyst (CFA) program for finance and investment professionals.

Based on the results of the survey among CFA members globally, respondents feel that the impact of the global financial crisis will persist for another three to five years, similar to the sentiment expressed last year. However, only 25 percent predicted a continued fallout beyond five years, down from 32 percent who held that view last year.

In the meantime, 34 percent of members in Asia-Pacific believe that the crisis will last between one and two years as opposed to 22 percent in North and South America and 21 percent in Europe, Middle East and Africa.

“Asia-Pacific members seem to be more optimistic for 2012 with only 15 percent indicating the impact will last beyond five years, which is a change from 2011 when 26 percent indicated that it would last more than five years,” the research said.

The sovereign debt crisis in Europe is widely seen to continue, with three-quarters of respondents seeing no improvement this year.

In terms of investment prospects, the CFA survey expects equities to under perform other asset classes, with 59 percent of respondents globally predicting that asset classes other than equities will be top performers in 2012.

“US respondents are outliers, with a majority predicting global equity markets to be top performers,” the research said.

“Weak economic conditions and the overhang of perceived systemic risks may contribute to poor expected returns for risk assets like equities,” it added.

The CFA research said “it’s difficult to imagine strong market performance unless faith can be restored in the fairness of markets for all participants.” It noted that 22 percent of those surveyed think the integrity of global capital markets will be worse in the coming year (13 percent felt this way the previous year), while 22 percent feel it will be better (32 percent felt it would be better in previous survey).

“The lack of visible progress in improving global capability to detect and mitigate systemic risks is weighing heavily on members,” the research said, noting that 38 percent of members globally see “improved regulation and oversight of global systemic risk” as being the most needed regulatory/industry action in 2012, as compared with only 23 percent in 2011.

“Slow starts at the national policy level and lack of progress in global coordination of systemic risk oversight are being outpaced by investor concerns about the potential of future systemic disruption,” it said.

Asked whether the integrity of global capital markets in 2012 will be better or worse than 2011, the research said that more than half (56 percent) felt it would stay about the same.