CIMB pushes low-volatility assets as correction looms
Investors have been advised to diversify their portfolios with low-volatility assets as global stock markets could experience a correction this year or next, says CIMB Principal Asset Management.
The forecast comes as the equity upside cycle seen in developed markets has already ended, said chief investment officer Win Phromphaet.
Global equities have continued growing for many years and volatility in global stock markets is expected this year because of political risks from Brexit, Italy’s upcoming election and the European Central Bank’s likelihood of adjusting its monetary stimulus programme, said Mr Win.
These risk factors will eventually affect market sentiment and result in market volatility, he said.
Despite emerging markets’ upside gain from the global economic recovery, there are still concerns over how commodity prices could decline, said Mr Win.
Even though the Thai stock market will benefit from domestic economic growth, earnings per share growth among SETlisted companies has increased more slowly than share prices, which could induce a correction in the domestic stock market, he said.
Amid such a bearish outlook, CIMB Principal is offering an investment concept under the “Stay Invested and Stay Diversified” theme, and has launched the CIMB Principal Global Management Volatility Equity Fund (CIMB-Principal GMV), with an initial public offering scheduled to run from Feb 19-27.
The fund will invest in the Acadian Global Managed Volatility Equity UCITS Fund, managed by Russell Investments Ireland Ltd.
The fund’s investment strategy — managed volatility — entails selecting global quality stocks based on the internal quant model.
Acadian Global Managed Volatility Equity UCITS Fund has assets under management of US$20 billion (630 billion baht).
As of Dec 31, the fund had an investment return of 11.5%, higher than the MSCI World Index at 10.9%.
“The company has a positive outlook on global stock markets this year, but there are several factors affecting the markets in the short term. These volatile factors include high share prices, fiscal policies and political factors,” said Mr Win.
“The firm believes the CIMB-Principal GMV is an option for those looking to increase their low-risk global investment portfolio in order to reduce the impact from volatility and increase profitability when the markets move upward.”
Such a view echoes that of Kasikorn Asset Management (KAsset), which recommends investing in emerging market equities, especially China, as they are expected to generate the biggest return this year.
KAsset executive chairman Vasin Vanichvoranun said equity investment remains more attractive than bond investment, but a bullish stock market outlook might not materialise in 2018 because share prices already rose extensively last year.
“Overall, share prices have become higher and global bond yields are rising amid expectations of a faster than expected rate hike by the US central bank given accelerating inflation,” said Mr Vasin.
“As a result, assets may face heavy selloffs around the globe, thus leading to higher market volatility.”