Personal Investment Strategy, Tactics and Tips

Emerging market stocks are expected to be the best performer in 2008. South Korea, Taiwan and Hong Kong are tops in Asia, with emerging markets in Europe, Latin America and Mid East being the best. Read on from the Citi Private Bank analyst.

Thailand: Emerging equities to shine in 2008; Citi analyst says US will underperform, Bangkok Post, 17 January
Emerging market equities will be the world’s best-performing asset class in 2008 amid increasing global market volatility, says Norman Villamin, the head of research and strategy for Citi Global Wealth Management Asia Pacific.

Emerging markets would be marginally affected by the US sub-prime mortgage meltdown, while strong growth and rising inflation would lift prospects for equities.

Global bond yields have fallen significantly in 2007 and could rise in 2008 in the US, UK and the Europe, making capital gains less attractive.

“The global valuation of equities was at the lowest in 15 years in 2007,” Mr Villamin said yesterday in Bangkok. “But we want to focus on uncertainties. The theme is not at all confident in the outlook and earnings. 2008 is a year that is characterised by volatility rather than trends.”
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Hedge funds winners in 2007 were those that bet on emerging markets and sub-prime issues. Those produced the big winners. Losers were the computer-based modelling quant strategies’ funds. Many were overwhelmed by wild price swings caused by the second half’s credit problems. Here’s a review of the funds that made the headlines.

Big winners, losers for hedge funds in 2007, Reuters News, 11 January
By Dane Hamilton
NEW YORK (Reuters) - Increased market volatility brought gains and pain for many hedge funds in 2007, pummeling computer-based quant strategies but producing big wins for bets in emerging markets and on credit travails, according to industry watchers.

Overall, the average hedge fund ended 2007 in solid double-digit positive territory; but there were wide disparities of performance, with some top funds doubling or more in value and others falling by double digits.

Hedge fund performance analysis is always incomplete or misleading, since the privately held funds typically report only to their investors. But three large indices that compile figures — Hedge Fund Research, Barclay Hedge and Hennessee Group — all showed industry gains for 2007, up 10.36 percent, 10.4 percent and 11.64 percent respectively.

Overall, a big winning strategy was betting on emerging markets, particularly Asia-related, as hedge funds rode strong gains for equities markets overseas.
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Our Aussie friends are not as fit as they’d like to be - finance-wise. Close to 1 in 3 were unsure of their financial future. And if you walk the street of Sydney or Melbourne, every other person you meet would have no idea how to plan for one. This is indeed alarming for our friends in the lucky country.

Australia: Australians fail financial fitness test, survey finds, Canberra Times, 6 December

AUSTRALIANS are being urged to add ”financial fitness” to the top of their New Year’s resolutions lists after research found that many were failing to focus on their fiscal wellbeing. A survey commissioned by banking services giant Citibank has found that many Australians are not saving, budgeting or seeking financial advice.

The survey of 400 adults found that 29per cent were worried about their financial future. Citibank head of sales and distribution for wealth management, Cameron McLeod, said recognising and identifying financial issues was an important first step in gaining control of finances. ”Figure out where your financial weaknesses are whether it’s an inability to control your debts, failure to stick to a savings plan, or failure to make your money work harder for you,” Mr McLeod said. ”I’d urge Aussies not to bury their heads in the sand, but to make 2008 the year to get ahead.”

The research also showed that 50 per cent of Australians save money only when they can, 22 per cent rarely save anything and only 28 per cent are disciplined enough to set aside money every time they get paid. About 19 per cent of respondents would last only one week on their savings if they lost their job and had all the usual expenses to pay. When it came to the battle of the sexes, men were found to be slightly better at saving, reporting they could last an average of 7.6weeks, whereas women said they could only last 6.6 weeks.
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India stock watchers are expecting the markets to be tougher this year too (now just who isn’t…). Lower interest rates could help the real estate sector.

India, Experts speak, The Economic Times, 1 January
Ratnesh Kumar MD & Head-India, Citi Investment Research
I expect 2008 to be a tougher, yet a positive year for Indian equities. Growth drivers are strong and resilient - expect GDP growth of around 9% and earnings growth of around 20%. Valuations overall are not really a big concern once embedded asset values are considered, but further PE multiple expansion looks unlikely. What the market has to guard most against is overconfidence, be it among investors or companies (in fund raising, acquisitions and governance).

Keshav Sanghi, Head, Deutsche Equites
I am bullish on India. I see 15-20% growth for Indian corporates and a 15-20% growth for index for the year from these levels. There are various factors underlying this bullish tone. Besides continued corporate earnings, an m-cap of $1.6 trillion is attracting a whole new set of investors. Domestic investors are also waking up to the India story. The year 2007 saw inflows of $16.5 billion. I see no reason why it cannot be a lot higher, this year.

Andrew Holland, ceo & md, DSP Merrill Lynch
Globally it is going to be a testing year. This quarter will set the tone and we will start to get real evidence of how hard the landing in the US is going to be. There are concerns over the increase in credit card deliquencies which is starting to creep higher.
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Happy New Year! I’m sure non are happier than the Chinese stock market investors. The Shanghai Composite Index ended the year up 97%! But at a PE Ratio of 59, many are jittery. Global pundits seem to be united in their predictions for China - don’t expect a repeat in 2008.

China stocks could be hindered in 2008 by slower profit growth, The Wall Street Journal Asia, 3 January
Shanghai — THE NEW YEAR might sap strength from the already limping China bull market. Corporate profit growth, a key stimulus for the country’s soaring stock prices last year, is likely to noticeably lose momentum in 2008, especially for the bellwether financial and energy sectors, analysts say.

Analysts estimate that earnings per share jumped 29% to 31% in 2007 for companies measured by the closely watched MSCI China Index. In many cases, per-share earnings rose more than twice that rate at financial heavweights like banks, insurers and brokerage firms that dominate market capitalization on China’s exchanges. The country’s benchmark Shanghai Composite Index nearly doubled last year.

Profits will almost surely remain relatively robust this year, as economic growth continues to power ahead at about a 10% rate. However, average growth in net income per share could slow toward 25%, according to a recent report by Morgan Stanley analysts.
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