While China continues to be one of the fastest growing economies in the world, there are concerns about an asset bubble brewing in the country. In a proactive move to avert an asset bubble, the Chinese authorities raised the reserve requirement for banks again in February, effectively reducing the amount of capital available for banks to lend to businesses and individuals. While this move is a wise decision to curtail speculative lending and borrowing practices, it could weigh on China's economic growth especially if the authorities turn more aggressive with their credit curbs and monetary tightening. However this appears unlikely for now as China seems to prefer a gradual approach to prevent any significant fallout to its economy and asset markets.

The IMF predicts that the government debt-to-GDP ratio in the G20 countries will explode to 118 per cent by 2014 from pre-crisis levels of around 80 per cent.

Greece has become a ticking time bomb as the country struggles to rein in its fiscal deficit and meet heavy debt obligations. The global recession has already sent the country's tax revenues lower, and weakened its financial position even further, making borrowing costs prohibitively high.

While some argue that Greece is not big enough to cause a major problem, investors are fearful of contagion risks where problems may spread to other vulnerable countries such as Portugal, Ireland, Italy and Spain.

If these highly leveraged European economies run into problems servicing their government debts or meeting redemptions, this could spook investors and hurt global equity markets. Greece has significant debts obligations which are due in the coming months and it remains to be seen if it will run into difficulties. The European leaders have pledged to help Greece if needed to safeguard the financial stability of the Euro, but so far they have given little details of how they would do so. However, many global fund managers have expressed confidence that Greece will be bailed out eventually after some political wrangling within the European Union.

European finance ministers have stepped up the pressure on Greece, giving it until mid-March to put its public finances in order. They have told Greece that they must show by March 16 that it is on track to cutting its budget deficit from 12.7 to 8.7 per cent this year and to below 3 per cent by 2012. All eyes will now be on Greece and the European Union to see how events unfold in the coming weeks.

Despite the fact that U.S. headline unemployment dropped during January, the employment picture remains rather bleak. There are a rising number of workers who have exhausted their unemployment benefits, and plenty of part-time workers who are “under-employed”. Some estimate that 20 per cent of the US workforce is either unemployed or significantly under-employed and this dislocation is causing economic growth to stall.

Overall however, the thrust of the U.S. economy does appear to be improving. There were some encouraging signs from the recent payroll data. They included a further increase in temporary hiring, an increase in manufacturing jobs, an increase in the number of hours worked per week, and an increase in wages paid to workers.

However an area of concern for the U.S. economy is the commercial real estate sector. Bad commercial real estate loans have grown significantly over the past year with further defaults and foreclosures expected on the horizon, resulting in potential losses on bank balance sheets. Thus bank lending may remain restrictive, particularly for real estate developers. This will crimp the economy to some extent, although larger companies will still have access to capital in the corporate bond market.

Other uncertainties facing the U.S. economy include tax hikes and tighter banking regulations. In addition to proposing curbs on major U.S. banks, President Obama's budget proposal has also put forth more than US$1 trillion in tax increases over the next ten years.

Within the equities space, we remain most positive on the Asia ex-Japan region which is expected to enjoy superior economic and earnings growth compared to developed markets.

We are also positive on the outlook for the commodity sector in the medium- to long-term, but investors must have a strong risk appetite as the sector is very volatile and could see a pullback in the short term if the U.S. dollar gains more traction, should risk appetite wane.

Longer term however, economic buoyancy and rising affluence in emerging markets like China and India will fuel the demand for a broad array of commodities including base metals, soft commodities and oil.

Meanwhile, Gold should still be sought after by global investors looking to diversify away from the structurally weak U.S. dollar. The precious metal is also seen as a good a hedge against uncertainties and inflation, which could surface down the road.

Equity markets are likely to experience a lot of volatility in the coming months as uncertainties about debt woes in Europe and monetary tightening in China will surface from time to time to spook investors and hurt investor-sentiment.

For those looking to invest for the medium term, any weakness in markets will present a buying opportunity, although it's best to invest gradually over the coming months.