New Delhi: Stefan Keitel, managing director and global chief investment officer, asset management and private banking, Credit Suisse Group, spoke to Mint about the investment outlook in 2010 during a visit to India last week. Edited excerpts:

Growth projections by multilateral institutions have been revised upwards for the year. Do you agree with the view?

I am anything but surprised that growth assumptions will be upgraded. We expect for the next quarter again (that) the analysts will be forced to revise their growth expectations, and this could deliver some ongoing positive support for the capital market in general, and for risky assets specifically.

We think over 2010 the market will be caught between positive surprises from the macroeconomic side but also the fears from the interest rate hiking side. That means we expect a year full of volatility.

You have been upbeat about emerging markets for a long time. Based on recent data, have you revised weightages for emerging markets?

Changing dynamics: Keitel says gold can be the substitute for the world’s leading currencies. Ramesh Pathania / Mint

We see some risk factors for emerging markets to do with capital flows. They are now going back a bit from emerging markets to traditional markets. This has something to do with risk appetite and dollar strengthening... Emerging markets are going through the start of tightening cycle because they are in a much better shape. They are really confronted with an inflationary scenario. This is not the case with traditional regions. This will cause some nervousness on emerging markets.

In this scenario, would you bring down equities holding?

We are still moderately overweight equities, and we are still moderately overweight equities in the rather cyclical regions. We want to stick to that positioning.

We think risk is rather on the upside, that analysts have rather to upgrade their growth assumptions and that from a fundamental view, equity markets specifically are still in quite good shape.

We expect underperforming emerging markets for the first half of 2010, but that kind of underperformance is a perfect opportunity to invest in emerging markets...

You were upbeat on gold last year. What is the outlook this year?

Gold did extremely well in 2009; we cannot expect that this dynamic in price appreciation will go further. It will be much less in 2010. There could even be a setback; already a setback has taken place. There could be another setback in gold, very much driven by ongoing period of US dollar strength over the next weeks and months, but personally, I think these are rather buying opportunities.

There are many drivers pointing out the gold story is not over. Inflation, of course, is helpful for gold, but the main driver for the gold price appreciation is structural currency weakness. There is a visible lack of trust with regard to paper money in general, and with regard to the dollar specifically. This will not change. This is one of the most visible outcomes of the financial crisis. Look at the all stimulus packages, the imbalances, massive liquidity pumping.

This did not improve the stability of the main currency blocks. They (market participants) are looking for insurance, they are looking for a substitute for the world’s leading currencies.

The substitute is gold.