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Investment strategy amid a volatile market

Overall investments in different asset classes have fluctuated continuously this year, caused by the recovery of the major economies of the US, Europe and China, and a general recovery in the global economy, amid the uncertainty of fiscal policy in the US - and especially the timing of quantitative-easing (QE) tapering.

This column discusses investment strategy in various assets - debt, equity and commodities (oil and gold) - amid this volatility in the view of the fund-manager team of Asset Plus Fund Management.

We have a positive view on investment in equity with an overweight position over other assets, using a strategy to diversify in stocks worldwide. We suggest overweight on European equities, both in short- and long-term prospects.

We see a stronger outlook for the European region's economy, the earnings growth of listed companies, con?cerns over sovereign debt and bank debt being reduced, and a low valuation of stock prices, especially in bank?ing-sector stocks that are trading at a discount compared to other markets around the world.

For Japanese stocks, pro-growth policies known as "Abenomics" include aggressive monetary easing from the Bank of Japan that has pushed down the value of the yen, contributing to a 46-per cent year-to-date (as of Dec 10) gain on the Nikkei so far this year.

We recommend overweight on Japanese stocks in the short term by investing in automotive, banks and the export sector, and neutral in the long term.

US equities in the short term have been driven by the profitability of listed companies and economic growth, but in the long run concern over US fiscal policy and also the debt-ceiling issue will affect market sentiment.

We have reduced our overall US equity weighting to neutral for short-term investment and suggest investment in the technology, insurance and financial sectors.

Asian and emerging-market equities have benefited from capital inflows, due to the delay in US QE tapering. We suggest overweight in short-term and neutral in long-term investment.

Good prospects for government reform and the stable economic environment in China are factors that have prompted investors to buy Chinese equities. We are more positive on Chinese and Hong Kong stocks, but in the medium term will be cautious due to remaining policy implementations, while the long-term outlook will benefit from the reform.

As to investments in the bond market, in the short term interest rates are expected to remain low due to the delay of QE tapering. We prefer investment in emerging markets' bonds, which carry higher yields than US bonds.

In the long term, we suggest underweight on bonds, as we expect global interest rates to rise due to the economy recovery and the beginning of QE tapering.

For the commodities market, oil prices may stay low in the short term because of the easing of the Middle East situation and the resumption of oil production in Iran.

In regard to long-term prospects, oil prices may rise following a global economic recovery, but an increasing oil supply may limit the price level. We recommend investors be cautious about investment in oil, with a trading WTI (West Texas Intermediate) price range of US$93-$103 (Bt2,980-Bt3,300) per barrel.

Gold, meanwhile, is used by investors as a hedging bet against rising inflation, but fears of QE tapering are damping concerns of higher prices. We expect the gold price will continue to move in the low range, and that the metal will lose its benefit as a currency play and inflation hedge.

Finally, for those interested in investing in global equities, we recommended investment in a mutual fund that has a policy to invest directly in global equities and is managed by a specialised fund-manager team.

The fund should have liquidity with a daily trading feature, so investors can monitor the market and investment outlook in order to plan or make their own investment decisions.

Also, the fund may have a special feature for investors to gradually receive partial gains during their investment horizon, such as it may auto-redeem to investors when the net asset value per unit increases every Bt0.50 from par, which is suitable for a volatile market situation.

Investment contains risks, so please study each prospectus carefully before making an investment decision.

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