F&C ponders investment future of developing nations

He said: "China is obviously the most important developing nation, but concerns linger over its exchange rate. Does it let this go up against the dollar, impacting its domestic economy, or carry on with its current policy of keeping the exchange rate low, thus exporting deflation to the rest of the world and contributing to global economic problems?"

Noting that China currently holds significant exposure to US treasury bonds, Mr Tigue said that any decision to ditch this policy could spark rate rises in the US and derail economic recovery in the developed markets.

Keith Churchouse, director of Surrey-based Churchouse Financial Planning, said this could generate cause for concern.

He said: "China is a very interesting economy. It sets its own norms. It has the power and ability to make changes and if it suits China, it will do so."

With regard to developed markets, Mr Tigue said it will be interesting to see whether the "dash for trash" of the last six to seven months will end, with investors returning to defensives and healthcare stocks.

He said: "The main message we can take from the last 12 months is that if equities look cheap by historic standards, then investors are right to buy them, as anyone who invested at the bottom of the market can attest.

Looking ahead, Mr Tigue said: "Shares will grind slowly higher rather than shoot up over the next few years."