Newspaper article International Herald Tribune

Opportunities in Asia

Newspaper article International Herald Tribune

Opportunities in Asia

Article excerpt

Charlotte Wun of RBC Wealth Management offers advice on hedging against inflation and shares her ideas on good investments in Asia.

Charlotte Wun, chief investment officer for Asia at RBC Wealth Management in Hong Kong, gives her perspective on current market conditions and investment opportunities.

Q. Inflation is rising despite a weak global economy. What should Asian investors do to protect themselves?

There are a number of ways to hedge inflation. One can buy inflation-linked bonds such as Treasury Inflation-Indexed Securities and iBonds. The Hong Kong government issued iBonds in July of last year with a coupon linked to the consumer price index over the last six months. The performance of iBonds in the secondary market has been very good, and the Hong Kong government is going to issue a second iBond soon. And, of course, real estate remains strong as a traditional tool for Asian investors to hedge inflation.

Q. Oil prices seem to have regained their footing, and as they rise they are likely to affect many Asian economies. What does this mean for investors?

A.Asian investors have to closely monitor the recent rise in oil prices as higher oil prices still have the ability to disrupt the rally in equities. Year to date, oil prices have risen 6.27 percent, while the world MSCI equity index gained 10.8 percent.

Investors generally believe that global growth -- as seen through positive data from the United States and China -- and liquidity driven by quantitative easing were behind the recent rally in oil prices. However, the situation could still change for the worse if the continued rise in oil prices carries over to other key components of the C.P.I., like food prices. The model run by the American financial analyst Gary Shilling shows that the rising inflation of the late 1960s and 1970s was devastating to both stocks and bonds.

Q. Where do you advise clients to have the bulk of their assets right now?

We believe equities are still attractive. We expect a further upside move of around 10 percent for the equity market. This is based on our assumption of a three-percentage-point contribution from earnings, with the remainder coming from higher price-earnings ratios. …

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