Inflows for emerging markets

Inflows for emerging markets

JAKARTA (JP): International investment firm Merrill Lynch
estimates that liquidity will flow next year to emerging
financial markets, especially the dollar-based markets of Asia
and Latin America.

Inflows of investment funds would rise because of an expected
drop in the world inflation rate, Merrill Lynch said.

"The world inflation rate should be lower in 1997 (3.7
percent) than at any time since the first oil shock in 1973," it
said.

The firm expected the moderate interest rate environment to
continue in 1997 which, together with low inflation, should
encourage more investment in bonds.

The firm's economists and strategists recommended that U.S.
dollar-based investors diversify their equity portfolio with up
to 35 percent in non-U.S. holdings.

These remarks were made at a press conference in New York
early this week.

Chief economist Donald H. Straszheim said the U.S. economy was
in the best fundamental shape it had been in for 25 years. "The
hallmarks of this exceptional state of affairs include slow
growth, low inflation, moderate interest rates, rising corporate
earnings and declining federal budget deficit," he said.

Chief investment strategist Charles Clough recommended
financial, technology and energy sectors for equity investment.

He warned investors about a potentially sharp drop next year
in short-term interest rates.

Chief market analyst Richard T. McCabe estimated that U.S.
stock market gains would be lower next year than in 1996 and
1995.

Senior economist Martin Mauro said the bond market's coupon
income would be more appealing than its capital gains.

"The five-to-10 year maturity range offers the best value in
the treasury market, which will begin auctioning inflation-
indexed bonds next month, for investors seeking current income,"
he said. (04)