The Strategist

Royal Bank of Scotland Urged to "Sell Everything"

01/13/2016 - 14:58

Royal Bank of Scotland has recommended to its customers pawning off all bonds, other than high quality. The Bank expects that 2016 will be a period of "disasters" because of low oil prices and problems in China's economy.

Elliott Brown by flickr
Elliott Brown by flickr
Royal Bank of Scotland sent out an analytical report for its clients. The institution recommends getting rid of bonds. The bank warned that financial markets are expecting "disasters" in 2016.

"I believe that the world is waiting for a year of cataclysms, and feedback from investors proves it – said head of RBS credit management division Andrew Roberts. - Sell everything but the most high-quality assets."

The Bank assessed current risks for investors as very high. "In a crowded hall, exit doors are small," - says the note. RBS stressed that investors should care not about making profit but preservation of capital.

According to Roberts, the European and US markets could fall by 10-20% this year. "London is also vulnerable to adverse shocks. All buyers of oil and gas assets thinking their dividends are in security will realize that this is not true,"- he said (quoted by The Guardian).

Among the negative factors, listsed the Royal Bank of Scotland, the fall in oil prices, instability in the markets in China, slowing global trade, debt growth, weak corporate loans and deflation. Their influence has already led to drop in stock exchanges at the beginning of the year. "We think that investors should beware," - concluded Roberts.

At the end of December 2015, Royal Bank of Scotland predicted fall of oil prices to $ 16 per barrel. "Why would anyone still bet on rise in oil prices? For me, it's as amazing as the reluctance of crude oil prices to lower in 2015. My answer to this question - open long positions on the stock exchange ", - said then Roberts in his review.

By the end of the year, analysts expect the market recovery. The consensus forecast of Bloomberg based on a survey of 42 economists shows that experts expect oil prices to $ 47 per barrel in the first quarter of 2016. At the time, Societe Generale, ING, Barclays and Bank of America Merrill Lynch lowered outlook for oil prices earlier this year.

At the beginning of the year, the oil prices plummeted to 12-year lows after the collapse of the Chinese stock exchanges. During the first week of January, Shanghai Composite Index lost 15%. A day earlier, WTI and Brent fell below $ 31 a barrel. On Wednesday morning, bids on the New York NYMEX and London-based ICE were around these levels.