Citibank urges diversified investment

Meanwhile, he expects the SET Index to touch 1,275 points at the end of the year.

Investors “cannot over-concentrate in one area [of investment products], they need to balance portfolios because of uncertainty and volatility. It’s unpredictable now. Make sure you diversify. Investors need to be very careful,” said Haren Shah, director and senior investment strategist for Citibank’s investment strategy group and wealth management – Asia Pacific, who is based in Singapore.

Foreign capital is expected to flow into Thailand in the second half of the year, depending on the global situation, which is now concentrated mainly on Europe’s sovereign-debt crisis, he said.

Shah expects the Stock Exchange of Thailand’s movement to be V-shaped with trading volatility on likely disappointment over government policies, weaker growth sentiment and a stronger US dollar.

“Now, what is affecting markets is sentiment, not valuations. There is a lot of volatility and headwinds, and people are reacting to this,” he said.

No clear solutions have been reached yet in the European Union, the United States and China, he said, expecting headwinds with contagion from the euro-zone debt crisis, an economic slowdown in the US and slower growth in China.

However, robust growth, a solid Thai financial position and less foreign-capital dependence are expected to drive the SET Index up to 1,275 points by year-end, the strategist added.

Citibank projects Thailand’s gross domestic product will expand by 3 per cent this year, driven mainly by post-flood restoration and prevention activities with fiscal spending and monetary support.

The bank’s 2013 estimate for economic growth is 5 per cent.

This year, Citibank suggests global investment portfolios should be diversified among fixed-income products such as investment-grade bonds and emerging-market debt, developed markets such as Japan, Germany and selective US sectors, emerging markets such as Hong Kong with liquidity play and Brazil with commodity play, plus gold and hedge funds.

There are cheap valuations for equities in Japan, where reconstruction demand may boost the economy this year, and Germany, where ongoing demand from Asia could ensure a modest growth in exports. The Japanese economy is expected to expand 1 per cent this year.

Among emerging markets, Shah favours Hong Kong, the best-performing bourse in Asia, as it is likely to be the first market for liquidity to come in.

Citibank anticipates quantitative easing from Europe this month.

“This year, we add gold by 3 per cent of the global portfolio [as a recommendation] because of the global uncertainty, high liquidity, low interest rates and our defensive strategy. Last year, we did not have gold in the portfolio,” he added.

Gold continues to be subject to a positive outlook on the back of investment demand from higher liquidity through debt monetisation and the printing of money, he said, adding: “Don’t worry about the price level [of gold], the trend is up. It’s a good place to store value.”

Citibank forecasts the gold price to average US$1,710 an ounce during the course of this year.