UPDATE 1-Pimco’s Gross says G7 won’t drive global growth

(Recasts, adds details)

NEW YORK, Jan 26 (BestGrowthStock) – Investors should shun Britain
and shy from the debt of other G7 nations as heavy borrowing
threatens to curb growth, and shift assets to Asia and
developing countries, said Bill Gross, manager of the world’s
biggest bond fund.

The group of seven industrialized nations have “lost their
position as drivers of the global economy” and will likely reel
for years from the effects of increasing indebtedness, Gross
said in his February investment outlook, posted on the Pacific
Investment Management Co website on Tuesday.

The most vulnerable countries are those whose public debt
may exceed 90 percent of gross domestic product within a few
years, which could slow GDP by 1 percent or more, he said. Of
those, Britain is a “must to avoid” because of its high debt,
which could devalue the pound, he said.

“Gilts are resting on a bed of nitroglycerin,” he said.

Other countries where rising government debt threatens to
slow growth — depicted by Gross within a “ring of fire” — are
Ireland, Spain, France, the U.S., Italy, Greece and Japan.

Gross, in panning British gilts, added that the nation’s
interest rates are artificially influenced by accounting
standards, which last year led to long-term real rates of 1/2
percent and lower.

To Gross, Germany is the safest, most liquid sovereign debt
alternative, but he would prefer to invest in Canada where the
liquidity and yield is adequate, he said.

Money managers looking for growth should buy assets in Asia
and developing countries where there is promise of consumer
spending, national debt is low and trade surpluses mean years
of reserves, he said. Less risky fixed-income assets should be
also concentrated in those regions, but weaker liquidity and
less developed financial markets mean most bond money cannot
abandon G7 nations, he added.

“Risk/growth-oriented assets (as well as currencies) should
be directed toward Asian/developing countries less levered and
less easily prone to bubbling, and therefore the negative
de-leveraging aspects of bubble popping,” he said.

Stock Report
(Reporting by Al Yoon, Editing by Chizu Nomiyama)

UPDATE 1-Pimco’s Gross says G7 won’t drive global growth