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Formula to become Rich 2
Global Investment Market Analysis
By Charter President - Brian KwanHK Junior Asset Management Association (香港青年資產管理學會 )
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Global Market Analysis
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Hong Kong Hang Seng Index
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US Dow Jones
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US
Huge deficit every year Trade deficit: USD 68.9 billion (10/2005)
Expenses >> Production Financial deficit: USD 83.1 billion (11/2005)
Long term weak dollar policy 15th increase of interest rate 4.75% Significant increase of property prices
property bubble is starting
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Developing Countries
Asia China, India, Korea, Thailand, Japan
Europe Russia, Hungary, Turkey
Latin America Brazil, Mexico
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BRIC
The most influential term since 2003 Established by Goldman Sac BRIC: Brazil, Russia, India, China Present: Total global asset value’s 3.5% 2020: Total global asset value’s 10-16% 2050: Overtaking the G6: UK, US,
Germany, France, Japan, Italy
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BRIC
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China
The fastest developing country GDP growth : 9.6% (US only 3.5% in 2005)
Financial Market Reforming QFII (Qualified Foreign Institutional Investor)
12/2005: US 5.64 billion (from 34 institutions) 12/2006: US 10 billion
QDII (Qualified Domestic Institutional Investor) e.g. 中國社保基金
09/2005: US 24 billion (19% stock, 81% cash, bond) 12/2010: US 125 billion (40% stock, 60% cash, bon
d) 股權分置改革 Currency
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China
人民幣兌美元滙價
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1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Source: Asian Development Bank (ADB) - Key Indicators 2004, People's Bank of China
只是整個升值周期的開始
RMB depreciated 1.4x since 1986, but GDP growth was 12.4x
7/2005 RMB appreciated 2% Market predict RMB’s value will be double within
5-10 years
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China
美國道瓊斯工業指數
美國納斯達克指數
FTSE英國 指數
225 日本日經 指數
印度孟買SENSEX 30 指數
香港恆生指數
香港恆生國企指數
香港恆生紅籌指數
300中國深滬 指數
( )計入股權分置補償後
12 : 4市盈率： 股息率
0
0.5
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1.5
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2.5
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3.5
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4.5
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0
市盈率
股息 率
(%)
低市盈率高股息率
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India
The 2nd fastest developing country GDP growth : 8.5%
Total population: 1.05 billion, just behind China Over 50% Indian is younger than 25 yrs old
Strong consuming power (~40% of total) 20 million of university graduates / year
Strong productivityCheap labor costs
Largest offshore software development center in the world -> 04/05 rose 34% to 17.2 billion US
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India
Enterprise management level just behind HK and Singapore
Strategic investment from HSBC P/E Ratio ~ 21
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India
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Japan
Economic burst in 1990s Over loan to enterprise -> serious bad debt -> loss of
confidence
Nikkei dropped from 33000 to 8000 (3/2003) Recovery of Japan since 2004
Continuous decrease in bad debt 2400 billion (9/2005) vs 2100 billion (3/2006) Ratio: 8.4% (3/2002) vs 2.4% (10/2005)
Enterprise loan demand rose to 5 years’ high Unemployment rate dropped to 10 years’ low – 4.5%
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Japan
CPI (11/2005) rose 0.1%, the first rise in past 5 years The second largest investment amount since 10/1987 –
530 billion in the last week of Jan 2006 GDP growth accelerated strongly in Q4 2005
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Japan
Nikkei rises from 8000 (03/2003) to 17000 (03/2006)
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Eastern Europe
Convergence with Western Europe: catalyst for growth, restructuring and reform
Growth prospects in the region are still undervalued
High skills and large natural resources at low prices
Good country and industry diversification Geared to European growth in FDI
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Eastern Europe - EU
Estonia 2004
Latvia 2004
Lithuania 2004
Poland 2004
Czech Republic 2004
Slovakia 2004
Hungary 2004Slovenia
2004
Turkey
Romania 2007
Bulgaria 2007
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Eastern Europe - FDI
FDI (Foreign Direct Investment) into Eastern Europe grew rapidly over the 1990s
Historically, accessing countries witnessed considerable jumps in FDI (eg Spain & Portugal)
Further opening of Eastern European economies may result in similar upward FDI in-flows
Source: 1990-2002, Balance of Payments Statistical Yearbook. World BankPast performance does not guarantee future results.
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Latin America
Mainly Brazil (50%) and Mexico (20%) P/E : the lowest in the world (8.3) Rich of natural resources e.g. wood,
sugar, mining Sugar Ethanol (49% Energy, 51% Food) Huge demand of Mining from China, India
Reducing the demand of external debt Mexico: outsourcing center from US
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Mining
Demand Industrialization and urbanization of China and
India is having a huge effect on commodities market
China is becoming the world’s largest consumer of raw material
Supply Lack of investment in previous decade and long
lead times limiting supply side reaction. Fewer and larger companies with management
discipline. Most focus on increasing shareholder value.
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Mining – China Demand
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Mining – Inventories & Prices
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Energy - Oil
Demand Daily consumption: 85 million barrel Predict: increase 2m barrel / year China and India’s fast growth US seasonal demand (Q3 Traveling, Q4 Winter)
Supply Number of oil farm drops 50% to less than 2500
around the world since 1981 All founded oil will be used within 30-40 yrs. Oil company don’t want to invest on oil exploitation
Afraid supply > demand (corrupted in 1970s)
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Oil History
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How to invest in these markets?
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Funds
Fund is a pool of money e.g. MPF Managed by professional fund manager
and a team of financial analysis Have specific objective e.g. China Have specific strategy and discipline Diversify to a minimum of 50 companies Management Fee Fund Class
Country, Sector, Bond, Currency, Hedge
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Method 1
Direct Fund Minimum amount ~ 10k/fund Bid-offer spread, redemption charge, fund
switching fee, management fee Managed by your own
You should have time to know the market You should have knowledge to analysis
Less diversification Suitable for specific market e.g. China A
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Method 2
Lump some portfolio Minimum amount ~ 150k Can select max 10 from 100 funds into the portfolio No Bid-offer, no redemption, free unlimited fund
switching Only have portfolio annual fee and fund’s
management fee Usually managed by Investment Advisor
You don’t need to have time and market knowledge More diversification and flexible for large asset
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Method 3A
Regular Saving Bank fund saving
Usually 1k per fund per month Funds are usually managed by the bank
rather than professional fund house Performance is less competitive
You need to change market by your own Less diversification and flexible for asset
accumulation
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Method 3B
Regular Saving Portfolio fund saving
Similar to lump some portfolio Usually 2k-10k per month for each portfolio Can select max 10 funds among ~100 funds f
rom global fund house Usually managed by Investment Advisor More diversification and flexible for asset acc
umulation Most young people nowadays use this
E.g. I’m using one from Royal Skandia
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How to design your portfolio?
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Formula to design portfolio
Set an investment objective Know your age and risk tolerance level Select the platform based on brand
name, fund choices, fund range, charges or bonus
Seek advice for market information Set the proportion for different markets
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Sample 1For young people
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Sample 2For elderly
