Barclays Wealth urges clients to favour holding developed countries’ bonds at the expense of cash, while it has cut its exposure to the stock market amid concerns that growth in developed countries will be sluggish.

Within its neutral stance on equities, the UK wealth manager has a small overweight stance on emerging markets and underweight on developed markets, it said in its latest tactical asset allocation update.

“This positioning reflects our increased concern that the global economic recovery will remain lacklustre at best. However, it also reflects more market-orientated developments – namely the fact that equities have enjoyed a very strong run, flattered by anticipation of the Fed’s boosted quantitative easing programme. This has left stocks, in our view, tactically short of headroom – and the Fed’s special measures are much more likely, in practice, to support bonds,” said Kevin Gardiner, head of global investment strategy.

On Asia, the firm said that in addition to its view, made earlier this year, that investors should buy Korean equities, it also wanted to recommend buying Chinese and Taiwanese stocks.

“Relative valuations make a convincing case to favour North Asian over South and South Eastern Asian equities. Extending this approach to other indicators, and to the wider emerging markets space, leads us to the same conclusion – on a broad range of indicators that include valuations, earnings momentum, monetary policy and growth expectations, North Asian equity markets score higher than the largest emerging markets in other regions,” said Manprett Gill, Asia strategist at Barclays Wealth.

Finally, on debt markets, Barclays Wealth said it recommends high quality Turkish lira-denominated debt because of the high yields which are available on it as well as its view that downside risks on the currency are limited.

“We think that strong domestic economic growth and external factors will likely underpin the lira. The yield on two-year Turkish lira-denominated sovereign debt is currently over 7.5 per cent, while AAA-rated Turkish lira-denominated debt of the same maturity issued by supranationals is yielding over 7 per cent,” Barclays Wealth said.