The United States central bank's plan for a second round of quantitative easing has been one of the worst-kept secrets in the market, pushing up asset classes across the board for months. Now that the proof is finally in the pudding, it is time to pinpoint how it will affect investments.
An unintended side effect of the Federal Reserve's decision to pump another US$600 billion into the system - the so-called quantitative easing 2, or QE2 - has been an exodus of liquidity to emerging markets where economic fundamentals are relatively stronger and yields more attractive.
'Expectations have been set on looser liquidity being available,' said Manpreet Gill, Asia strategist at Barclays Wealth.
Here we take a closer look at the possible effect of this liquidity on six important asset classes.
Equities
Asian stocks stand to extend sizeable gains, as QE2 will add even more impetus to an already steady stream of overseas fund flows into Asia.
'A lot of equity markets should be higher based on their fundamentals. Quantitative easing becomes the catalyst that helps them get there,' said Gill of Barclays Wealth.
