Deutsche Bank Private Wealth Management's investment chiefs have boosted exposure to developed and emerging market equities and cut cash holdings, while sticking to a generally cautious view for the next three months.

Deutsche Bank Private Wealth Management’s investment chiefs have boosted exposure to developed and emerging market equities and cut cash holdings, while taking a broadly cautious view over three months, the German firm said in a recent update on its thinking.

From a global point of view, Deutsche Bank said it is worth looking to exploit opportunities that will be create as many markets cease to be so closely correlated with one another as more “normal” conditions return, it said in its Investment Insights report.

“While we think that the current market rally may still have some way to go, we believe that the existence of such expected uncertainties demands a degree of investor caution over the next few months,” it said.

As far as its “high conviction” ideas are concerned, the bank has decided to scrap the idea of holding Asian investment-grade corporate bonds – taking the exit at the end of January. “We believe that high-grade bonds are particularly at risk from the expected gradual rise in core government bond yields. Recent market developments already indicate some degree of caution here,” the bank said.

“As a result, although we still think that Asian investment-grade corporate bonds are likely to continue to fulfil investors’ appetite for carry (relative to the US), further upside looks limited,” the firm said.

The cautiously optimistic view on global equities in general was echoed by the recent poll of fund managers by Bank of America Merrill Lynch, published earlier this week. (Click here.)

Asian favourites

On the other hand, Deutsche has recently looked t pushing into Asian equity sectors seen as benefiting from a global economic pickup. The bank is already keen on mobile payments or “wallet commerce” sectors, US high dividend-paying stocks and US technology stocks.

“Although risks remain, Asian economies look likely to benefit in 2013 from a decline in both global macroeconomic risk and also global economic policy uncertainty,” the note said. Deutsche’s favoured Asian countries from an export-recovery perspective are China, South Korea and Taiwan. Preferred sectors are shipping, autos and information technology. Countries seen as benefiting from government reforms and spending are china, South Korea and Indonesia.

Deutsche Bank said it expects that the US Federal Reserve will keep interest rates low for some time but is wary of US Treasuries and investment-grade debt. On US equities, the firm continues to see momentum-driven gains, but there is a chance that the market may revert to a longer-term average, or “mean-revert”, particularly if progress towards fiscal reforms in the country is derailed.

As for the eurozone, while there are significant risks still around, some recent data has been positive, such as purchasing managers’ indices. It is possible that aggregate gross domestic product will grow again from the second quarter of this year, the bank said.