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Bric builders

Sitting, as I was, in the Today Programme studio on the morning of the MPC’s announcement, discussing quantitative easing, I could not help but wonder where all this central bank intervention and Government initiatives were likely to take us.

Markets were clearly far from sure. In America, the performance of the key equity indices since last year’s presidential election had delivered a resounding thumbs down to Barack Obama, with the fall the worst since the 1900 election.

The focus of attention that morning was a speech made by the Chinese premier and the hopes of a big uplift in infrastructure spending restoring prosperity to the region. Exports from the Far East appeared to have fallen off a cliff as overborrowed Western consumers hauled hard on the spending reins. But with the risk of social unrest ever present in the People’s Republic, measures to bolster the local economy were always likely.

The future for Bric markets were among the themes of a Cofunds’ conference on retirement investing the previous day. When last I chaired a similar conference, there were plenty of advocates for the arguably aggressive approach of concentrating on emerging markets to build a pension pot. Despite the retrenchment many of these markets suffered, Neptune’s Chris Taylor unashamedly reiterated his support of Bric investment.

His opinion was that the only hope of achieving the superior returns to ensure a comfortable retirement was to invest in those parts of the world where real long- term growth was in prospect – a view echoed by Martin Currie’s Richard Evans who showcased their Asia Pacific fund.

The other contributors – Fidelity, Newton, Threadneedle and BNP Paribas – were more circumspect in their choices, with protected, bond, income and cautious managed funds all being promoted as suitable for pension investing.

Deciding which fund to present and what to say must be planned well in advance. It happened that the start of last week was particularly fraught, with shares in near freefall for the first two days. In such conditions, advisers can be forgiven for defaulting to lower-risk options for clients. Yet, with shares some 50 per cent or more off their highs, value must surely be present somewhere?

But we still do not know whether the measures being introduced by governments around the world will stave off a depression. Our own 50 basis point cut in interest rates was widely expected, as was the reduction in eurozone rates. Buying £75bn of gilts was more of a surprise, although some measures were inevitable. Perhaps it will persuade banks to lend.

Meanwhile, I was alerted to a notice posted on the HMRC website last week.

It seems Her Majesty’s tax and duty collector is changing its banking arrangements. Until now it has used the Bank of England – no surprise there, except that our central bank has decided to withdraw from the provision of retail banking and clearing services in order to concentrate on “core responsibilities”. And who is picking up the baton? Why, RBS and Citi – two of the most troubled banks on the planet. They probably need the business.

Brian Tora (brian.tora@centaur.co.uk) is principal of the Tora Partnership

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