KUALA LUMPUR – With the evolving global economic and political dynamics, its normal for investors to be concerned about their investment portfolios.
In June of this year, Schroders engaged its intermediary partners at the Schroders Malaysia Investment Conference 2022 in Kuala Lumpur to discuss the pivotal trends for the new future.
A diverse line-up of thought leaders discussed a range of topics such as global outlook, Asia’s economic growth story, sustainable investing and how digital assets provide opportunities for investors to reimagine their portfolios as well as generate returns in innovative markets and businesses.
Among them was Pang Kin Weng, Schroders’ Fund Manager, Asian Multi-Asset, who shared his views on the road ahead for global markets and how investment strategies could adapt in the new era against a backdrop of evolving global economic and political dynamics.
During the session, Pang highlighted that the higher inflation and interest rates are here to stay, but there are opportunities in inflation beneficiaries and reopening laggards. Hence, it is crucial to be nimble to navigate increased uncertainty in the markets.
Elaborating on opportunities amid inflation, Pang said: “With current inflationary pressures, we should acknowledge that it’s also a symptom of recovery. However, the caveat is that if hyperinflation comes through, a lot of investment assets will suffer. It is why the central banks all over the world are in a hurry to combat inflation because at this current moment it is not coming down yet. We are in the cross-currents of pent-up demand meeting a disrupted supply due to the pandemic, and it will take time to normalise.”
But the most pertinent question is what the opportunities are.
He listed several starting with:
- First, there is an opportunity to buy into inflationary assets and start to reduce exposure to deflationary assets. Deflationary assets are those which have done well for the past 30 years in a low inflationary environment. However, as we move into a higher inflationary environment for a longer time to come, it’s time to consider inflationary assets such as commodities in your portfolio. In a high interest rate environment, value stocks with a mature business model start to outperform growth as they tend to generate more cash flow and not rely on low interest rates.
- The second opportunity is China. Valuations in China have come down to a very attractive level. The question is what would be the trigger to allow this valuation in China to be unlocked? With activities starting to normalise as well as mortgage and credit growth rising from the bottom, these are indicators to give China a second look.
- The third opportunity is the reopening theme, as there is still a large segment of our economy which have not reopened yet. We’re only starting to reopen now and in months to come, there will be a lot more demand for tourism and travel within Asia so there are differentiated opportunities.
- The last one is REITs, which is an interesting asset class because they offer good value and the yields you are seeing across Asia ranges from 3% to about 6%. The return of office workers and of tourists into shopping malls show there is potential growth in revenue. Rents also do go up in the initial stage of an inflationary environment.”
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