KBank Private Banking and Lombard Odier recommend diversified portfolio, focusing on sustainable stocks to capitalize on post COVID-19 growth – highlighting European and emerging markets as outperformers
KBank Private Banking collaborated with a strategic alliance, Lombard Odier, in organizing a live streaming conference from Geneva, Switzerland, titled “Rethink Perspective: Path to Pandemic Recovery” to provide insights on global economic trends, post COVID-19. Given the accelerating revival in economies worldwide driven by large-scale stimulus measures, investors are recommended to capitalize on the changing market trends and opportunities so that their portfolio will enjoy ongoing growth post-COVID-19. Viewpoints were shared by two key professionals who are well-versed in global economics and investment strategy from Lombard Odier.
Dr. Samy Chaar, Chief Economist, Lombard Odier, provided an overview of the global economy as follows: “Economies worldwide are on divergent recovery paths. Much is dependent upon each country’s ability and progress in procuring and distributing vaccines domestically. As evidenced, countries with quickening vaccinations like the US, the UK and some other European countries have seen normalizing economic activity, thus enjoying faster economic recovery than the rest of the world. These countries are expected to establish herd immunity within the third quarter of this year.”
“For the US, the 1.9 trillion USD coronavirus relief package, which aims to revive domestic consumption, long-term investment of 2.2 trillion USD under the plan to rebuild its infrastructure, and the American Families Plan worth 1.8 trillion USD focused on child care and education – all of these initiatives are expected to put the US economy on a firmer footing sooner rather than later. Meanwhile, any US tax hikes to pay for fiscal stimulus measures are expected to be made only gradually; therefore, they may have limited impact on the economy. All in all, the benefits from economic stimulus measures will outweigh the downsides of any tax increases, which will primarily target the rich. Concurrently, the capital gains tax cannot be raised to 39 percent, but possibly from 20 percent to 30 percent only.”
Bearing in mind that economic recoveries in each region are uneven and discontinuous. Consequently, Mr. Stephane Monier, Chief Investment Officer, Lombard Odier, gave insightful viewpoints on the stock markets in each region, including other types of assets, as follows:
- Stocks in emerging markets, European stocks and debt instruments in emerging markets may offer the best returns over the next one year.
- Listed companies in the U.K., emerging markets and Europe, in terms of earnings per share (EPS), will outperform their peers in other countries, markets and regions.
- During an economic upturn, value stocks will offer greater returns than growth stocks. Although the value stocks are higher-priced, their EPS growth will continue to make them more attractive.
- On the contrary, gold, as well as European and US bonds, may offer the lowest returns as 10-year US Treasury yields are projected to stand at 2.0 percent as of year-end 2021 and 2.5 percent over the next 12-18 months. Such growth rates may adversely affect gold returns.
Regarding the Bitcoin trend, Mr. Monier said, “Cryptocurrency will likely be used widely around the world in the future, and blockchain technology will play a more important role in global financial markets. In terms of investment, cryptocurrency carries a number of risks because: 1) its value is not assessable, and prices tend to move in line with demand/supply; and 2) technological innovations could give rise to new crypto assets that may be more popular and successful than Bitcoin.”
Regarding investment strategy, Lombard Odier adheres to the principle of portfolio diversification:
- Equities and portfolio diversification including growth and value stocks, focusing on sustainable shares
- Debt instruments – with emphasis on investment in China, where returns are more attractive
- Complete the portfolio with private assets (particularly private equities) to generate additional returns over the long term.
KBank Private Banking shared similar views with Lombard Odier. Mr. Jirawat Supornpaiboon, KBank Private Banking Group Head, said in closing, “The world’s capital markets are currently experiencing high volatility, even as advanced economies like the United States are seeing post-lockdown recovery thanks to accelerated vaccination efforts. We firmly believe that long-term stimulus packages are a positive factor for the stock market, and that long-term investment through portfolio diversification would help to reduce short-term volatility. Moreover, the focus will remain on stock investment in the themes of “Winners of the New Economy”, “Health is Wealth” and “Save the World” – all of which are supported by specific factors – as well as the ability of the world’s top fund managers in selecting stocks that can generate good returns in the long run.”