In its second quarter investment outlook titled ‘Building confidence’, the Dutch private bank advises clients to favour Asian corporate bonds, with a particular focus on China, Indonesia and Malaysia.

The bank’s Hong Kong-based head of emerging market bonds, Carman Wong, believes Asian corporate bonds offer value relative to developed-market peers. “In addition to macro-economic positives, we expect Asian corporate bonds will attract large flows due to demand for saving instruments in Asia and effective diversification for foreign investors,” she said.

Improved investment conditions in the first quarter are reflected in a reduction of almost half of the cash position within the bank’s balanced model portfolios, to 18 per cent. The bond allocation is increased to 34 per cent, equities to 40 per cent and alternatives remain at 8 per cent. The bank retains an overall underweight allocation for fixed income due to low government bond yields.

ABN AMRO Private Banking has also moved to an overweight rating for industrial equities and advises clients to position themselves for a gradual manufacturing recovery.

Industrials join the bank’s list of preferred sectors as it increases its overall European equities position to neutral by taking profits on its US equities allocation, which has been overweight since July 2011.

Didier Duret, chief investment officer of ABN AMRO Private Banking, said that investor confidence is progressively returning as a result of improving economic momentum, lower market volatility and abating systemic risk.

“Last quarter’s spectacular relief rally has not exhausted the upside for equities – valuations are still comparatively low and many investors remain underinvested. For equities to move higher, they need to demonstrate the inner driving forces of earnings generation and sales growth,” he added.