Entries by Affin Hwang Asset Management

From the MD’s Desk: 2013 Market Outlook & Investing Guide

Will the strong bond fund buying and subdued equity continue in 2013? What are the key drivers to encourage investors to overweight in their equity exposureDrivers to encourage investors to overweight equities: Sustained economic growth as growth is not visible in the last 4 years due to unexpected events (ie; 2008 global financial crisis, European debt crisis, slowdown of BRIC). Decline in contagion risk (EU and US debt crisis). It is better now as debt is under control and balance sheet is normalising. However it will take a while to see confirmation of a full recovery.   The financial sector in the US had its run in 2012. What resulted in such good performance and will the party continue in 2013 Financial sector rallied due to: The US debt crisis, which resulted in dismal 2011 performance. By 2012, things started to take a better turn and that is showing it the banking sector’s earnings. There were more good news coming through in 2012, especially 2H12. Housing price starts to show signs of recovery & it helps when the US banks are less exposed to the domestic housing market after the sub-prime crisis. This helps to improve their balance sheet.   […]

Business trust vs REITs structure

Rules to allow the listing of business trusts in Malaysia are out and several listings are being pitched by bankers. In your view, how much more yield do you reckon business trusts should offer relative to REITs to be attractive in Malaysia, given their difference in risk profiles  Business trusts listed in Singapore have not done well in general. A few business trust IPOs in Singapore was also cancelled or postponed due to poor demand. This is despite high yields of 8-11% and good sponsor names.Business trust assets tend to be of limited life span, like a ship or a concession to a port. This is unlike freehold properties in REITs which last into perpetuity. Business trust assets also tend not to appreciate in value over time, again also unlike properties which have a long term capital appreciation tendencies.This basically means investors of business trust need to be compensated to hold a depreciating asset with limited income generating lifespan. So for example, if the asset life lasts for 10 years, then investors need to be paid 10% per year for the return OF their capital invested. On top of that, they need to be paid the risk of holding on […]

Investing in Gold 2013

Gold price ended the year 2012 higher, but has not delivered the spectacular gains of the previous years. What was the key reason gold prices performed as it did?Gold had a spectacular run from 2008 at around US$800/ounce to a high of US$1900/ounce in mid-2011. Since then it has traded sideways at a range of US$1500/ounce to US$1800/ounce.The run up in gold price was due to the massive central bank expansion globally, which was needed to get the world economy moving again financially. This frightened investors as the creation of so much fiat money caused some to believe people will not believe in it. That explains the buying of gold by investors as a hedge against the collapse of the paper/fiat money. In 2012, we had more of the same central bank pump priming, but this time, investors were more confident of the economic recovery prospects of the world. This basically meant the belief that central banks could handle the situation and hence, confidence in paper money was stable. As a result, the desire to invest in gold was not strong. What are the implications of this? Does it signal returning investor confidence in risky assets and the US dollar?Risky […]