Citigroup's private bank is advising clients to hold more bonds as the outlook for financial markets remain uncertain except for areas such as Indonesia, its head of investment for Asia said on Tuesday.
"Since it is a trading environment... you'll want to have a core portion of your portfolio that is heavy weighted on fixed income so that while markets find a direction, you at least earn an amount of carry along the way," Citi Private Bank's Debashish Dutta Gupta said at the Reuters Global Private Banking Summit.
For conservative investors, Dutta Gupta is recommending they invest about 50 percent of their assets in fixed income, 15-20 percent in equities, 10-15 percent in alternative investments such as hedge funds, and the balance in cash to take advantage of opportunities such as new share or debt issues.
Investors around the world, in particular wealthy clients of private banks, have become increasingly cautious about the global economy and are holding gold to protect themselves against the large amounts of currency being put into the system by Western central banks.
Citi, which manages about $165 billion in its wealth management business in Asia, recommends private banking clients hold bonds of developed countries with longer maturities to take advantage of the higher yields, given that central banks are unlikely to raise interest rates anytime soon.
In the case of emerging market bonds, which allow investors to enjoy higher yields as well as pickup from currency appreciation, bonds should be of shorter duration to minimize the risk of rising interest rates.
BULLISH ON INDONESIA
Turning to Indonesia, Dutta Gupta described the country as a long-term play and said it was not too late for investors to jump onto the bandwagon.
Indonesian stocks have risen over 40 percent so far this year, while the rupiah is up about 5.3 percent against the dollar.
"Throw your mind back to where Brazil was 10 years back when it was just coming out of the hyper-inflationary stage. In the first few years, the markets went up 20-30 percent every year so it was possible to buy the market 100 percent from the low and still make a significant amount of money."
"We like Indonesia very much... Indonesia is a completely different place today than what it was coming out of the Asian crisis," Dutta Gupta said. "We are looking at a very strong growth path."
Dutta Gupta's other recommendations included high-yield U.S. bonds, because corporate debt levels had fallen over the past decade and the risks of default were low, and Asian stocks with high-dividend yields such as Malaysia's BAT (BATO.KL) and Thailand's Electricity Generating PCL EGCO.BK.
He added, however, that it was too late to invest in gold and investors keen on the metal should wait for corrections.
"At these levels, its a little rich in my opinion to chase gold... Fundamentally, the gold bulls have a case and I am on their side, but I debate the entry point." Source: Reuters
"Since it is a trading environment... you'll want to have a core portion of your portfolio that is heavy weighted on fixed income so that while markets find a direction, you at least earn an amount of carry along the way," Citi Private Bank's Debashish Dutta Gupta said at the Reuters Global Private Banking Summit.
For conservative investors, Dutta Gupta is recommending they invest about 50 percent of their assets in fixed income, 15-20 percent in equities, 10-15 percent in alternative investments such as hedge funds, and the balance in cash to take advantage of opportunities such as new share or debt issues.
Investors around the world, in particular wealthy clients of private banks, have become increasingly cautious about the global economy and are holding gold to protect themselves against the large amounts of currency being put into the system by Western central banks.
Citi, which manages about $165 billion in its wealth management business in Asia, recommends private banking clients hold bonds of developed countries with longer maturities to take advantage of the higher yields, given that central banks are unlikely to raise interest rates anytime soon.
In the case of emerging market bonds, which allow investors to enjoy higher yields as well as pickup from currency appreciation, bonds should be of shorter duration to minimize the risk of rising interest rates.
BULLISH ON INDONESIA
Turning to Indonesia, Dutta Gupta described the country as a long-term play and said it was not too late for investors to jump onto the bandwagon.
Indonesian stocks have risen over 40 percent so far this year, while the rupiah is up about 5.3 percent against the dollar.
"Throw your mind back to where Brazil was 10 years back when it was just coming out of the hyper-inflationary stage. In the first few years, the markets went up 20-30 percent every year so it was possible to buy the market 100 percent from the low and still make a significant amount of money."
"We like Indonesia very much... Indonesia is a completely different place today than what it was coming out of the Asian crisis," Dutta Gupta said. "We are looking at a very strong growth path."
Dutta Gupta's other recommendations included high-yield U.S. bonds, because corporate debt levels had fallen over the past decade and the risks of default were low, and Asian stocks with high-dividend yields such as Malaysia's BAT (BATO.KL) and Thailand's Electricity Generating PCL EGCO.BK.
He added, however, that it was too late to invest in gold and investors keen on the metal should wait for corrections.
"At these levels, its a little rich in my opinion to chase gold... Fundamentally, the gold bulls have a case and I am on their side, but I debate the entry point." Source: Reuters
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