Sarasin identifies exceptional value opportunities for 'real' long-term investors

He expressed a conviction that there was now emerging some extraordinary value offered by both the debt and equity of some of the world's best and strongest companies.

Burkhard Varnholt, Chief Investment Officer, Bank Sarasin & Co. Ltd, said:

"The darkest days of the banking liquidity crisis in September when interbank lending and liquidity almost seized up on an unprecedented scale appear to be behind us. Since the 9th October government interventions across the world have replicated rescue packages similar to those initiated in the UK and these measures have begun to restore operational liquidity with gradual reductions in 3 month Libor interest rates. The steps taken on an international scale have been significant since they have allowed an immediate rescue programme without necessarily destroying shareholder confidence in the very institutions the packages were seeking to bail out. Stock markets during September saw high quality global equities becoming the victims of their own superior liquidity as a result of leveraged sellers having to realise cash this being the only exit available to them."

Varnholt added, "We believe that the ferocity of this selling could abate sooner than many expect and that there are emerging exceptionally attractive investment opportunities in some of the world's best and strongest companies. It is now possible to buy into corporate bonds and equity assets today on massively enhanced yields that are well in excess of cash and short-term government debt meaning it will be possible to lock into long-term redemption returns that would in a stroke satisfy the goals of many final salary pension schemes, charity portfolios and private investors."

Adding that global fiscal policy is also being rapidly eased in a Keynesian effort to support household and corporate spending, Burkhard Varnholt pointed out that it is not inconceivable that policy makers might try to penalise the sudden lurch to 'thrift' by households and businesses by cutting interest rates close to or to zero thereby making it punitive to hold cash and encouraging money to flow back to credit instruments, particularly those with a government guarantee.

Large global companies, he added, still therefore offer extraordinary liquidity, dividend flows that can grow against money market rates that look set to tumble and balance sheets that are far stronger than those of their bankers - all at unprecedented valuations.

In particular Varnholt went on to say that Sarasin had begun to reduce weightings in government bonds in favour of some high quality corporate bonds which would provide a major yield pick-up. In equity markets he added that the policy was to retain low exposure to emerging markets for the time being with the exception of Greater China including Taiwan and Hong Kong where he felt there was greater scope for a market rebound with their absence of foreign debt.