Beyond CPF

This has been a busy year for the CPF Board as various enhancements were made to the schemes that impact the medical and retirement needs of CPF members.

With these enhancements came announcements through numerous media channels to detail and explain what people can expect next.

2016 Investment Outlook - Surfing The Value Wave

Attractive value is evident.

Higher US interest rate concerns and slower China growth fears have resulted in some good value appearing. This is particularly evident within Asia where valuations have fallen towards 1.5x price to book1. When they have fallen this low, Asian equities have historically rallied an average 95% over the next five years2.

But, it will not be plain sailing. A “profit recession” – in which earnings results do not match forecasts – is a real risk. This risk appears discounted in many instances, but it remains.
The income story also looks to have further life given the likely slow pace at which US rates will likely rise.

In the following articles, our CIOs focus on 2016 opportunities and risks they see as they surf the value wave.

1As at 16 November 2015, the price to book ratio, as measured by Thomson Reuters Datastream, was 1.52X. When Asia’s price to book ratio falls into the 1.5 - 1.75x band, equities have rallied an average 95% over the subsequent five years.
2Source: Eastspring Investments as at October 2015 based on market data from January 1996 to June 2015 inclusive.

How to apply Asset Allocation to your portfolio in current market conditions?

Asset allocation. Perhaps the most important decision any investor can take and yet, mention that to most retail investors and you’re likely to get the blank look of boredom. Most retail investors, particularly in Asia, just couldn't care less about having a balanced well thought out allocation, focusing rather on the next ‘hot’ trade (which often turn out a bit damp).

Its not just the retail investors, it’s the whole industry around them. Many private bankers, keen to generate more commissions from their clients will provide them with these ‘hot’ ideas, constantly feeding client’s insatiable emotion of greed. With most private bankers being paid a share of the commissions they generate, it shouldn't surprise anybody that they are driven to churn clients or offer investment structures which hide their fees (and are often not suitable for their clients), with allocation advise taking a backseat.

October promises to be more interesting

The timing of the first rate hike in almost a decade from US Federal Reserve (Fed) was the stuff of considerable speculation for most of 2015.

Expectations of an imminent increase to the near-zero interest rate in the US were the key driver behind the rally in the US dollar. The greenback appreciated 11.2% against a basket of major currencies prior to the Federal Open Market Committee (FOMC) meeting in March. The dollar index rose over 100 for the first time in 12 years.

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