Should investors fear or face the dragon?
The birth of 2012’s dragon ushered weak growth in America, political unrest in the Middle East, and a debt crisis in Europe. Should investors risk getting burned? Roxanne Uy investigates.
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ill the dragon burn your cash to the ground, or will it soar with your investments towards profitability? Last year, we brought you investment ideas with the goal of leading you to more informed investment decisions. Now, as the dragon year crawls in, we explore more ideas that could open up lucrative opportunities. Even though 2012 is expected to be unpredictably volatile, Philip Poole, HSBC Global Asset Management’s global head for macro and investment strategy, says there are still attractive opportunities for investors. “Diversification will be critical to successful investing given the volatility and uncertainty that surrounds the outlook for 2012,” he adds. May
18 HONG KONG BUSINESS | APRIL 2012
“Diversification will be critical to successful investing given the volatility and uncertainty that surrounds the outlook for 2012”
the celestial beast bring you good luck in your investments. Idea #1: RMB bonds Offshore renminbi bond is an asset class that is undeniably developing at a rapid pace. The RMB bond market in China is opening up new investment opportunities in one of the world’s most rapidly growing and dynamic economies, Poole believes. “Investing in the offshore RMB bond market provides investors with exposure to potential RMB appreciation and portfolio diversification --- something that is hard to find in such a highly correlated world. Chinese policymakers are keen to internationalise the RMB, and the process is already well underway. These
bonds look attractively priced in our view at the current time,” he adds. Idea #2: State-owned dollar bonds Indeed, Investors in Hong Kong have a good reason to look to domestic opportunities after the city accounted for a big chunk of the global GDP growth in 2011. Though bond yields have been as low as they are in the West, defensive assets still prove worthy of investment. Hartmut Issel, head of APAC’s Cross Assets Research and head of Singapore UBS Wealth Management Research, advises investors to seek dollar bonds of state-owned Asian issuers as these pay higher coupons than their Western counterparts. These also offer higher yield than the sovereigns without adding more risks. “Investors may also take positions in the Singapore dollar, Chinese yuan, and Indonesian rupiah as these currencies have appreciation potential and, in the case of the rupiah, high yields as well. Outside Asia, we like the British pound