By Genevieve Cua

EQUITY valuations are currently attractive, but private clients should take a longer term view if they are to benefit in the long term, says SG Private Bank regional head of investment teams and market solutions Marc Lansonneur.

'Investment horizons remain short. Asian clients typically have a short horizon, but the financial crisis forced people to take an even shorter view. Cash as a percentage of portfolios remains very high, and people are waiting for opportunities. You need to build a long-term position if you want to extract value.'

Still, the crisis appears to have helped nudge clients toward weighing investments with a risk/reward view, a marked improvement from pre-crisis days.

'Clients have the risk appetite to invest . . . it is a matter of timing. They are now more aware of the risks of products and assets. This is a big change from the past where people invested without a portfolio approach or looking into risk/reward,' he says.

Societe Generale Private Banking economist and strategist Xavier Denis believes equities will post a much stronger performance in this decade than they have in the last 10 years.

'We're heading for quite a positive period,' he says. He expects the economic impact of the earthquake and nuclear crisis in Japan to be localised, and fiscal spending to provide a significant boost to Japan.

Emerging economies, however, are likely to see a slower pace of growth in the second half.

Inflation is a concern. 'Central banks are behind the curve. They need to quicken their pace of tightening and to be more inclined to let their currencies appreciate. That could be a negative driver in the short term,' says Mr Denis. Tighter monetary conditions coupled with higher commodity and oil prices are potential dampeners to growth.

The firm is positive on equities, corporate bonds, and emerging currencies which are seen to be still undervalued. On equities, it likes the energy, IT, and pharmaceutical sectors.

On corporate bonds, Mr Lansonneur said: 'Liquidity is still very abundant and corporate balance sheets extremely strong. Probably the question is more of (the amount of) carry rather than capital appreciation. We are positive on the high yield market. We don't think the asset class has run its course right now.'

Asian high yield, however, is a matter of some concern. Low interest rates have spurred demand and depressed yields. 'We think it may be coming to an overbought situation. A lot of investors are using high yield as an alternative for a short-term placement. That has pushed yields down. We may come to a point where it is not sustainable.'

He adds: 'The high yield segment is benefiting from a low default rate, but if you expect a slowdown in growth, default rates will increase.' The firm also believes gold is toppish, and could see a reversal before it crosses the US$1,500 (S$1,886) level.