Citibank: Equities still outshine bonds
The equity asset class continues to look more attractive than bonds, with global earnings expected to grow by 9% this year, Citibank says.
The outlook is buoyed by a global economic growth projection of 3.4% in 2018, the highest since 2010, said Shrikant Bhat, Citibank’s managing director and regional head of investments for Asia-Pacific, Europe, the Middle East and Africa.
Strong economic fundamentals are the main factor lending support to global economic growth, while expected global earnings growth has the momentum to drive the stock market going forward, Mr Bhat said.
“We see that the equity market is quite positive in the first 12 months after the synchronised [monetary policy] tightening,” he said. “For now, we believe we will not enter into a crisis situation and that there should not be a negative impact on the equity market.”
For fixed income, however, the impact of policy tightening is a higher credit spread, meaning bond value drops and bond yield goes up. So the fixed-income portfolio may be slightly negative, Mr Bhat said.
“We see two big trends in Asia: positive cash flow and the allocation of [emerging-market assets] into a global
portfolio,” he said.
In Thailand, the economy is expected to expand by 3.8%, he said, while the interesting sectors for equity investment are consumer-related and banking.
Mr Bhat suggested a portfolio overweight equities from markets such as Europe and emerging Asian economies, particularly China and Malaysia.
Fixed income is recommended as underweight. Citibank prefers Asian fixedincome securities to global emerging-market bonds.
Don Charnsupharindr, senior vice-president at Citibank Thailand, said the bank aims for its Citigold business to expand at a rate similar to that of last year, when it registered a 40% growth rate in terms of customers.
Citigold is a wealth management business whose customers must deposit a minimum sum of 5 million baht for investment. The segment has seen strong competition among banks because of high growth.
“The [growth] of wealthy customers is driven by two key factors, including growing middle-class income and the country’s demographic change, which has pushed Thailand to become an ageing society and sparked higher demand for money management and financial planning for retirement,” Mr Don said.