Société Générale Private Banking, whose parent French bank suffered a cut in its financial strength ratings by Moody’s recently, was at pains to stress that it is not a “major player” in sovereign debt as it outlined its investment views.

The private bank also said it is “heavily underweight” of developed countries’ equities, amid concerns about the eurozone debt crisis and the associated sluggish European economy, preferring defensive sectors to those of a more cyclical flavour.

As far as its bond market views are concerned, SocGen’s private bank said it prefers to hold corporate and emerging market debt, attracted by what it sees as preferable risk-return trade-offs for such asset classes. As far as developed countries’ sovereign bonds are concerned, the bank is more positive about UK and US debt.

“The United States and United Kingdom have implemented debt reduction strategies by holding interest rates low and maintaining inflation rates at moderate levels,” the firm said in an investment strategy letter authored by Xavier Denis, chief economist, and Kim March, strategist.

“On the whole, we’re not a player in the sovereign debt market. The partial investment failure of a German bond auction at a rate below 2 per cent serves as a valuable reminder; investors consider that the returns offered are not sufficiently attractive,” the private bank said.

As for currencies, SociĂ©tĂ© GĂ©nĂ©rale Private Banking predicts the euro will fall further against the dollar in coming months, reaching a rate of $1.25 over the next six months and $1.30 a year out from now. It also expects upward pressure the Japanese yen to persist, seeing the currency reach 75 JPY/$ in six months and a rate of 80 one year out. As for sterling, which SocGen believes is 15 per cent undervalued against the euro, this mispricing will unwind only slowly, given the likelihood of continued very low UK official interest rates.

As far as emerging markets are concerned, Société Générale Private Banking is positive on China, despite some expected slowdown and expects further monetary easing in 2012; Russia is the bank’s other preferred market, due to attractive valuations.