My Portfolio Plan For 2017
Stocks valuations are at historic highs after a long bull market, the risk of euphoria driven bubble has grown.
US stocks have been priced in for earnings growth. The risk for equities in 2017 is that market will be disappointed when growth does not come in as expected.
Hence it is important to allocate a substantial weightage of portfolio into bonds. Focus on bonds that are less sensitive to interest rate hike, see here: myasiaprivatebank.blogspot.sg/2016/12/misperception-of-bonds.html?m=1
Deregulation and potential interest rate hikes in 2017 will benefit the banks. Every 25 basis point increases in Fed fund rate is going to increase earnings of US banks by 2% to 3%.
=> US banks with huge loan books will benefit.
Asia will be the world’s biggest insurance market in 2017, thanks to the region’s growing middle-income sector, low insurance penetration, and the economic development linked to China’s “One Belt, One Road” policy. Source: m.asia.insurancebusinessmag.com/asia/news/breaking-news/asia-will-be-a-top-insurance-market-in-2017-says-major-reinsurer-229138.aspx
=> This will benefit insurance companies that focus on Asia.
UK economy is heading off to a cliff. This may lead to further interest rate cut and increase in asset purchasing program.
=> These are favourable conditions for GBP denominated bonds. See here: myasiaprivatebank.blogspot.sg/2016/12/uk-economy-is-heading-off-cliff.html?m=1
These are my plans for portfolio management:
1. Reviews existing portfolio to check which stocks / bonds / currency need to cut loss or reduced
2. Buy short term bonds or bonds with coupon reset feature or bonds denominated in GBP
HSBC 5.625% Perpetual (USD)
Swedbank 5.50% Perpetual (USD)
BHP 6.25% 19Oct2075 (USD)
ANZ 3.75% 23Mar2027 (SGD)
BPCE 4.50% 3Jun2026 (SGD)
HSBC 4.25% 14Mar2024 (USD)
Pershing Square 5.50% 15July2022 (USD)
Bank of America 2.503% 21Oct2022 (USD)
Credit Suisse 3.80% 15July2022 (USD)
Huarong 3.625% 22Nov2021 (USD)
Aviva 4.375% 12Sep2049 (GBP)
Prudential 5% 20Jul2055 (GBP)
=> Buy GBP bonds with full loan to hedge FX risk.
3. Buy stocks with prospect of earnings growth
Long term direction of share price follows earnings trend of the companies.
Investors may want to gain access to the stocks via Fixed Coupon Note or Bonus Enhance Note for better entry level.
These are stocks whereby earnings growth have been healthy:
AIA (HKD)
Facebook (USD)
Ping An Insurance (USD)
Tencent (HKD)
Disney (USD)
Alibaba (USD)
Visa (USD)
Mastercard (USD)
Marriott International (USD)
Alphabet Class A (USD)
Berkshire Hathaway Class B (USD)
Development Bank of Singapore (SGD)
Oversea Chinese Banking Corporation (SGD)
United Overseas Bank (SGD)
4. Deploys interest rate hedging tools, such as:
- Interest rate linked note - investor pays a fixed cost and in exchange receives Libor floating rate every 3 months.
=> If Libor rate increases, investors will receive bigger amount of cash inflows every 3 months.
- Buy bank stocks like Bank of America, JP Morgan, DBS, OCBC when valuations are cheap.
=> Banks benefit when interest rate goes higher. They provide natural hedge to leverage portfolio.
- Convert US loan to EUR or GBP loan when FX rates are favourable.
=> US is likely to raise interest rate in 2017 but not Europe and UK.
- Sell EUR (or GBP) call USD put options in the view that investors do not mind converting at prevailing strike price to do a loan conversion.
5. Buy dividend stocks to generate recurring income
History has shown that rising interest rate does not necessary push down quality dividend stocks. See here: myasiaprivatebank.blogspot.sg/2016/12/rising-interest-rate-may-not-be-bad-for.html?m=1
It is important to buy dividend stocks that have rising earnings. Good entry point will be when dividend yield is near to 6%.
Ascendas REIT (SGD)
Capitaland Mall Trust (SGD)
Industrial & Commercial Bank of China (HKD)
Starhill Global REIT (SGD)
Parkway Life REIT (SGD)
Mapletree Commercial Trust (SGD)
6. Buy gold when price is below 1000
Gold can act as a hedge to financial crisis. But entry price is paramount.
All in cost of mining gold is between 800 to 1200. Hence buying gold below 1000 provides margin of safety.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog.
US stocks have been priced in for earnings growth. The risk for equities in 2017 is that market will be disappointed when growth does not come in as expected.
Hence it is important to allocate a substantial weightage of portfolio into bonds. Focus on bonds that are less sensitive to interest rate hike, see here: myasiaprivatebank.blogspot.sg/2016/12/misperception-of-bonds.html?m=1
Deregulation and potential interest rate hikes in 2017 will benefit the banks. Every 25 basis point increases in Fed fund rate is going to increase earnings of US banks by 2% to 3%.
=> US banks with huge loan books will benefit.
Asia will be the world’s biggest insurance market in 2017, thanks to the region’s growing middle-income sector, low insurance penetration, and the economic development linked to China’s “One Belt, One Road” policy. Source: m.asia.insurancebusinessmag.com/asia/news/breaking-news/asia-will-be-a-top-insurance-market-in-2017-says-major-reinsurer-229138.aspx
=> This will benefit insurance companies that focus on Asia.
UK economy is heading off to a cliff. This may lead to further interest rate cut and increase in asset purchasing program.
=> These are favourable conditions for GBP denominated bonds. See here: myasiaprivatebank.blogspot.sg/2016/12/uk-economy-is-heading-off-cliff.html?m=1
These are my plans for portfolio management:
1. Reviews existing portfolio to check which stocks / bonds / currency need to cut loss or reduced
2. Buy short term bonds or bonds with coupon reset feature or bonds denominated in GBP
HSBC 5.625% Perpetual (USD)
Swedbank 5.50% Perpetual (USD)
BHP 6.25% 19Oct2075 (USD)
ANZ 3.75% 23Mar2027 (SGD)
BPCE 4.50% 3Jun2026 (SGD)
HSBC 4.25% 14Mar2024 (USD)
Pershing Square 5.50% 15July2022 (USD)
Bank of America 2.503% 21Oct2022 (USD)
Credit Suisse 3.80% 15July2022 (USD)
Huarong 3.625% 22Nov2021 (USD)
Aviva 4.375% 12Sep2049 (GBP)
Prudential 5% 20Jul2055 (GBP)
=> Buy GBP bonds with full loan to hedge FX risk.
3. Buy stocks with prospect of earnings growth
Long term direction of share price follows earnings trend of the companies.
Investors may want to gain access to the stocks via Fixed Coupon Note or Bonus Enhance Note for better entry level.
These are stocks whereby earnings growth have been healthy:
AIA (HKD)
Facebook (USD)
Ping An Insurance (USD)
Tencent (HKD)
Disney (USD)
Alibaba (USD)
Visa (USD)
Mastercard (USD)
Marriott International (USD)
Alphabet Class A (USD)
Berkshire Hathaway Class B (USD)
Development Bank of Singapore (SGD)
Oversea Chinese Banking Corporation (SGD)
United Overseas Bank (SGD)
4. Deploys interest rate hedging tools, such as:
- Interest rate linked note - investor pays a fixed cost and in exchange receives Libor floating rate every 3 months.
=> If Libor rate increases, investors will receive bigger amount of cash inflows every 3 months.
- Buy bank stocks like Bank of America, JP Morgan, DBS, OCBC when valuations are cheap.
=> Banks benefit when interest rate goes higher. They provide natural hedge to leverage portfolio.
- Convert US loan to EUR or GBP loan when FX rates are favourable.
=> US is likely to raise interest rate in 2017 but not Europe and UK.
- Sell EUR (or GBP) call USD put options in the view that investors do not mind converting at prevailing strike price to do a loan conversion.
5. Buy dividend stocks to generate recurring income
History has shown that rising interest rate does not necessary push down quality dividend stocks. See here: myasiaprivatebank.blogspot.sg/2016/12/rising-interest-rate-may-not-be-bad-for.html?m=1
It is important to buy dividend stocks that have rising earnings. Good entry point will be when dividend yield is near to 6%.
Ascendas REIT (SGD)
Capitaland Mall Trust (SGD)
Industrial & Commercial Bank of China (HKD)
Starhill Global REIT (SGD)
Parkway Life REIT (SGD)
Mapletree Commercial Trust (SGD)
6. Buy gold when price is below 1000
Gold can act as a hedge to financial crisis. But entry price is paramount.
All in cost of mining gold is between 800 to 1200. Hence buying gold below 1000 provides margin of safety.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog.
Comments
Post a Comment