If you are betting that growth will shoot up globally this year, the odds may be against you. Sure, the much-dreaded US quantitative easing (QE) concluded smoothly last year, but with Japan, Europe and China eyeing QE options, what may be in store for investors in 2015?

Experts who track various global markets predict that growth and market performance will diverge globally and give their take on which countries could outperform.

China to pause

The economic growth slowdown in China, which has led to a rout in commodity prices, may continue to haunt global investors this year as well.

The loss of momentum, along with rising deflationary pressure, will continue to be the dominant issues affecting the China market, as per an Asia-Pacific Strategy report from Credit Suisse.

The country’s central bank helped the market with interest rate cuts and there is a reasonably good chance for a further cut, given that the real rate of interest is high.

While the move may cheer the stock market, company earnings — particularly those in the financial sector — may be hurt.

So investors have to take selective bets in companies as cost control, mainly through capex discipline, will be the key to performance. Credit Suisse analyst Vincent Chan notes that this will be a crucial year of reform to manage the local government’s debt problem.

Hit by spill-over

The spill-over effect of China is likely to affect other global markets as well. Credit Suisse expects that Hong Kong may see declining Chinese tourists, due to both economic weakness in China and Hong Kong’s political instability.

This will cap the growth of the retailing sector and also affect retail rentals.

The country also formally enters the ‘Post-Occupy’ period this year and could see issues such as political reform, high property prices, lack of upward mobility for youngsters and lack of growth direction of the SAR remaining unsolved.

The country may also be hit when there is a rate hike in the US. The vulnerability of Hong Kong’s residential property market is another area of concern.

Likewise, the Australian economy is facing headwinds due to the fall in commodity prices caused by falling Chinese demand.

Hasan Tevfik of Credit Suisse predicts that the country’s growth outlook will be ‘unimpressive’ due to three factors.

First, capital investments by mining firms are just beginning to contract from the peak of 2013. Still, mining capex makes up 7 per cent of GDP compared with the long-term average of 2-3 per cent.

Second, commodity companies may suffer a contraction in their earnings as weak commodity prices start to be reflected in their financials. Third, banks may have to raise additional funds if the Financial System Inquiry highlights further capital requirements. The report forecasts low single-digit earnings growth in 2015 for Australia. The country’s currency is also likely to depreciate by 10 per cent.

US to shine

But things were bright last year in the US among developed nations and the country’s equity indices touched all-time highs.

The broader stock market should continue to do well, with no major risks this year as well, says Vijay Devarakonda, Senior Research Analyst, JMN Investment Research.

Still, stocks in the energy sector continue to be vulnerable to declining oil prices; likewise, stocks in the social networking and e-commerce space have witnessed stretched out valuations.

The interest rate moves of the Federal Reserve will be the key factor to watch this year.

The Fed has a dual mandate to foster maximum employment and price stability along with an inflation target of 2 per cent.

The latest projections as of December 2014 point to the GDP growing at 2.6-3.0 per cent, with inflation at 1.5-1.8 per cent in 2015.

The Fed believes that the risks to the outlook for economic activity and the labour market are nearly balanced and expects to remain ‘patient’ to normalise its stance of monetary policy, as per the statement published in December.

Devarakonda expects that the Fed might stay put with its current monetary policy, with the federal funds rate anchored at 0-0.25 per cent throughout 2015.

Low growth phase

On the other side of Atlantic, high unemployment, unutilised capacity and low inflation may however force the European Central Bank to continue with its easy monetary policy, complemented with QE programmes to foster growth.

Even with that, growth may remain muted in the euro zone.

Over half of the world GDP, made up of the developed world, will continue to remain in low growth-low inflation mode, with risks of deflation, observes the ‘2015 Equity Market Outlook’ report from Birla Sun Life Asset Management.

Among the developed countries, growth may inch up in Europe and Japan, but will drop in the UK.

Among the emerging markets, Russia will decelerate, while Brazil may not pick up appreciably.

The report expects that the global monetary policy environment may remain benign.

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