Global fund managers need to be hyper-aware of the currency and commodity market implications of falling oil prices, Standard Life Investments has warned.
Standard Life Investments head of global strategy Andrew Milligan has warned investors and managers to stay attuned to the market impacts of the “oil price decline”.
“Fund managers need to be highly selective, bearing in mind the different effects of significant currency and commodity movements, growing yield differentials and more volatile capital flows,” Mr Milligan said.
“As an example, oil is driving divergence between countries and sectors. This is another reason to stay neutral on emerging markets as a whole, relying on stock selection decisions to add greater value to portfolios.”
Standard Life head of emerging market debt Richard House also pointed to the impact on emerging markets, singling out Venezuela as an example.
“Falling oil prices have significant implications for Venezuela, with the dominance of oil revenue in trade and fiscal accounts,” he said.
“Authorities seem reluctant to alter policies in response, and despite Venezuela having the largest oil reserves globally, the market prices in a high probability of sovereign default in the next few years.”
However, chief executive Keith Skeoch also pointed to a number of “more beneficial effects of cheaper energy” including consumer spending and corporate investment.
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