Skandia Investment Group expects equities to outperform other asset classes in the coming months as fears of a sovereign bank crisis fade.

The group’s latest Monthly Asset Allocation Report, which is compiled by Skandia’s global asset allocation committee, also sees the group reduce its weighting to Japan following the government’s defeat in the region’s recent upper house election.

Senior fund manager Ryan Hughes says: “Global equity markets rose sharply in July as fears of a sovereign debt and banking crisis in Europe faded. We continue to believe that equities will rise, outperforming other asset classes. While there are some signs that overall economic growth is slowing, we expect the global economy will continue to grow at a pace that will generate decent earnings growth.

“We continue to prefer emerging markets, with a bias towards Asia Pacific ex Japan. In the past couple of weeks, Chinese equities have performed well as recent softer data on both growth and inflation have raised hopes that we are approaching the end of the current monetary policy tightening cycle. In other parts of the Asia Pacific region, monetary tightening continues. We have increased our exposure to LATAM while cutting emerging EMEA as slightly lower inflation numbers led the Brazilian central bank to raise interest rates by less than expected.

“We have also closed our overweight exposure to Japan, following the recent Upper House elections which saw the governing party lose control, making passing necessary structural reforms more difficult.”