The importance of country impact is reappearing in investment strategy as some sector clusters begin to split up, according to research by UK investment manager Schroders’ investment strategy unit.
“ Clearly, sector and country impacts change dramatically over time. So far in 2001, the fragmentation of some global sector clusters has been an important trend and will be for the foreseeable future,” says Justin Abercrombie, head of the strategy unit at Schroders.
As an example, the research shows that while the technology sector has recently behaved globally, UK technology stocks are starting to behave differently to the worldwide trend. In the same manner, US telecommunication stocks are outperforming European ones “dramatically”, says the research.
Furthermore, the report notes that the country effect in Japan never disappeared, with local shares behaving more like each other rather than their sector peers.
“ The key to successful investing therefore, is the ability to accurately identify emerging behaviour in global market returns in order to determine what new trends are developing,” says Abercrombie.
However, the research suggests that investors should impose a consistent view across all regions for sectors that are continuing to behave globally, such as energy and materials.