Cutting Through Noise to Make Sound Investment Decisions

Bracing for Market Turbulence

Volatile. If there ever was a word to describe markets now, that would be it. Markets were whipsawed last month amidst a torrent of trade retaliatory measures between the US and China, as fears of an escalated trade war kept markets on edge over who will blink first.

Geopolitics also took centre stage following a missile attack in Syria by US-allied forces, as part of a joint-coordinated strike to stem the Syrian regime’s use of chemical weapons in its arsenal.

Locally, Malaysia will also hold its 14th General Election (GE14), with polling taking place on the 9th May.

Trade tariffs, geopolitics, missile strikes, elections – that’s a lot to digest for any experienced fund manager, let alone a casual observer. So, what’s an investor to do?

It’s important to first realise that global markets are prone to ‘noise’ and that most short-term fluctuations in asset prices are a direct reaction from traders reacting to such noise occurrence.

Broadly, noise refers to any information (true or false) or activity that distorts the price trend or underlying fundamentals of an asset class.

In this fast-paced digital age with social media platforms such as Twitter and Facebook, such noise is further amplified in markets that can lead to further confusion.

Here are 3 tips on how investors can cut through the noise to make sound investment decisions:-

Stay Rational

In this current 24-hour news cycle, it’s easy for any investor to be overwhelmed by the constant stream of news flow including economic data and market news that flood our inbox notifications all the time.

Sometimes, this can lead to investors making rash decisions that puts their portfolio at risk. It’s important for investors not to overreact in this instance and to sometimes take a back seat and wait for the dust to settle.

Media outlets including financial publications, online news, business portals and TV channels have the habit of sensationalising headlines and narratives because that’s what sell news and ads.

Market sell-offs, plunging indexes, a sea-of-red, and doomsday scenario headlines prod at our basest instincts of fear and anxiety, which makes us want to tune-in to find out more.

The field of behavioural finance has conducted plenty of research as to why investors behave the way they do in stock markets.

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Affin Hwang AM Launches Global Target Return Fund – An Objective Based Solution amidst Volatility

KUALA LUMPUR – Affin Hwang Asset Management Berhad (“Affin Hwang AM” or “the Company”) announced today the launch of the Affin Hwang World Series – Global Target Return Fund (“WS-GTF” or the “Fund”). The Fund is a wholesale feeder fund that seeks to achieve capital appreciation over the medium to long term period by investing in a collective investment scheme, namely Schroder International Selection Fund Global Target Return (“Target Fund”).

The Target Fund is a Luxembourg-domiciled fund managed by Schroder Investment Management (“Target Fund Manager”). To meet its investment objective, the Fund will invest a minimum of 80% of the Fund’s NAV into the Target Fund and a maximum of 20% of the Fund’s NAV into money market instruments, deposits and/or liquid assets.

Chan Ai Mei, Chief Marketing & Distribution Officer of Affin Hwang AM said, “In an environment of heightened risks and increased volatility in markets, the role of an absolute return focused strategy has never been more relevant than it is now. As markets enter a new transition phase, the demand for a dynamic and flexible approach to asset allocation has become more punctuated.”

“The Fund will benefit clients by focusing on absolute returns with the intention of minimising both volatility and the risk of huge losses which are important to investors especially in this current market environment. With its unconstrained asset-allocation, investors will be able be to tap into a broad investment universe to reap the full benefits of diversification,” Ai Mei says.

The Target Fund is designed to deliver on a clearly defined target return-risk objective of USD 3 month LIBOR plus 5% p.a. returns(1), whilst minimising portfolio volatility by lowering the standard deviation of the Target Fund below 8%(2). By employing a flexible multi-asset allocation approach that is benchmark unconstrained, the Target Fund will invest in a broad range of asset classes and investment instruments from global equities, global investment grade bonds, currencies, and high yielding credit to other real estate, infrastructure and commodity-related securities.

Schroders is a highly regarded, award winning independent active manager with assets under management (AUM) totalling $US 604.7 billion as at 31 December 2017. Its team has pioneered an objective based investing approach to deliver on clear client outcomes, without relying on arbitrary benchmarks or a static asset allocation. With its distinct and flexible investment approach that is responsive to market conditions, its targeted return strategy has yielded annualised return of 7.78% p.a. since inception(3)

On outlook for markets and portfolio positioning, Stephen Kwa, Head of Product, Fixed Income and Multi-Asset Schroders Australia said, “While the world is not markedly different to what it was a few months ago, there are some things that have shifted. Firstly, the evidence is continuing to support the idea that core inflation is starting to rise in the US and that this is increasing the uncertainty around the future course of monetary policy. The latest pronouncements from the US around tariffs and trade wars have also elevated uncertainty around trade, retaliation, and by extension, growth.”

“Secondly, while economic conditions have been good (decent growth, improving profits, low inflation) and the US tax cuts a clear pro-cyclical boost to growth and profits, the exponential rise in equity prices through the December-January period was an over-exuberant response leaving both sentiment extreme and valuations extended.

“To be clear, we believe it’s premature to call the end to the bull market in equities just yet, as most bull markets end with recession and the risk of recession in any of the major economies at present is low. Structural equity valuations (especially for the US) are still demanding. Likewise the gap between interest rates (short and long) and the economy remain large – meaning the upside risk to yields remains (despite the moves we have seen already).  Therefore we see valuations as still too expensive although we are judiciously adding some risk, so far mainly in higher yielding credit at the expense of more vanilla fixed income, but for the reasons outlined are treading cautiously,” Stephen says.

The Fund is available to Sophisticated Investors who seek capital appreciation, have a medium to long term investment horizon and a high risk tolerance. The Base Currency of the Fund is in USD. The Fund is offered in eight (8) currency classes, namely USD Class, MYR-Hedged Class, SGD-Hedged Class, AUD-Hedged Class, GBP-Hedged Class, EUR-Hedged Class, RMB-Hedged Class and HKD-Hedged Class. The minimum investment amount is RM 10,000 for MYR and $5,000 for USD, SGD, AUD, GBP, EUR, RMB and HKD classes.

Investors are advised to read and understand the contents of the Fund’s Product Highlights Sheet and Information Memorandum dated 23 April 2018 before investing. Investors who are keen to learn more about the Fund can visit https://affinhwangam.com/, and invest through any of Affin Hwang AM sales offices, or all Citibank branches in Malaysia.

– End of Press Release –

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For media enquiries, please contact:

Lee Sheung Un | sheungun.lee@affinhwangam.com | +603 2117 6592

FUNDamentals - April 2018