BF2206 Wealth Management | Sugar Mummy
Alson Tang Chin Sing | Jonas Lam Kai Sen | Pia Gabrielle Alba Soliven |
Tasnim Inas D/O Seeni Mohamed | Wong Hong Zheng Nevin
Client Analysis
Client Profile, Financial Situation, Client Goals, Intent and Action
Client Profile
A 45-year-old Senior Quality Engineer, happily married with 3 kids and is approaching retirement in 20 years
Age
SUGAR
MUMMY
Marital Status
45 years of age
Married with 3 children
Occupation
Housing Type
4 Room HDB
Senior Quality Engineer
Qualification
Health
Bachelor’s Degree in
Computer Science
High Blood Pressure
High Cholesterol
Mr. Sugar
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Financial Situation: Current Annual Cashflow
SUGAR
MUMMY
Overview of our client’s annual stable cashflow that allows for substantial investible assets
Fixed Outflow
$91,000
Variable Outflow
$18,200
$6,384
$180
$28,602
$19,800
$2,846
$3,600
$2,736
$2,712
$5,940
Annual
Income
CLIENT ANALYSIS
CPF
Contribution
Insurance
Premiums
INSURANCE
Education Cost
(Dependent)
Family
Allowance
RISK PROFILE + SAA
Income
Tax
Food
Miscellaneous
MARKET OUTLOOK
Medical
FUND SELECTION
Household
Expenses
Investable
Assets
CONCLUSION
Financial Situation: Current Financial Position
SUGAR
MUMMY
Overview of our client’s stable financial position that allows for substantial investible assets
ASSETS
CASH
INVESTMENTS
$45,650
$16,500
PROPERTY
CPF
$367,000
OA: $5,433
SA: $193,147
MA: $64,299
LIABILITIES
NET WORTH
MORTGAGE PAYABLE
Total Assets: $692,029
Total Liabilities: $154,000
NET WORTH = TOTAL ASSETS – TOTAL LIABILITIES
$538,029
$154,000
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Finanical Situation: Analysis
SUGAR
MUMMY
Analysis of our client’s financial situation - based on Annual Cashflow and Financial Position
1
2
Consistent Cash inflow
•
Stable annual income of $91,000
•
Strong cash inflow
•
•
3
4
Mortgage Payable of $154,000
entirely paid via CPF Ordinary
Account
CLIENT ANALYSIS
INSURANCE
Moderate Cash Outflow
RISK PROFILE + SAA
Positive net cash flow, as seen by available
investible assets annually ($28,602)
Able to make additional investments due to
stable cashflow
Minimal Investments
•
Limited current investment portfolio consists
of only Singtel stocks, UOB Fidelity and
Cryptocurrency
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Client's Goals
SUGAR
MUMMY
To retire comfortably
Main Goal
•
To retire comfortably by age 65
•
To have sufficient cash inflow to sustain variable expenses
after retirement
•
Be independent of children income
Adjusted Goal
•
To suggest early retirement at age 60, and improve quality
of life with additional $3,000 per month excluding variable
expenses, on top of monthly $2,120 CPF payout
•
CLIENT ANALYSIS
INSURANCE
Ensure sufficient cash inflow to sustain current lifestyle
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Client's Intent
SUGAR
MUMMY
To build and diversify his investment portfolio so that he can generate enough returns to retire comfortably
Cumulative Retirement Sum at age 60 assuming investment
portfolio generates 0% return
Total Expected Cash Inflow after Retirement
Total Expected Cash Outflow after Retirement
Retirement Sum Required by age 60
$753,557
$534,240
Require 5.43% p.a. Return on
Investment to meet shortfall
($1,559,033)
$1,024,793
Cumulative Free Assets (S$)
1,400 K
1,200 K
1,000 K
800 K
600 K
400 K
200 K
0K
45
CLIENT ANALYSIS
50
55
INSURANCE
60
RISK PROFILE + SAA
65
70
MARKET OUTLOOK
75
FUND SELECTION
80
85
CONCLUSION
Client's Action
SUGAR
MUMMY
To invest and ensure a minimum of 5.43% ROI while balancing risk appetite
2
1
Strategic Asset Allocation based on
Risk Profile that ensures a minimum of
5.43% ROI to meet goals
Tactical Asset Allocation to
capitalize on short term market
opportunities to increase ROI
3
Full Individual Insurance Coverage for
Life, TPD, CI and E.CI and to not rely on
Group Benefit Insurance
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Insurance
Insurance Prioritization, Existing Coverage, Proposal of Supplementary Insurance
Client’s Insurance Prioritization Pyramid
SUGAR
MUMMY
To identify our client’s insurance needs and priorities
Justification
To ensure client has sufficient funds to sustain desired
lifestyle beyond expected retirement age of 60 years old
Retirement
Savings
Income
Protection
Ensure financial security for the client & his dependents
should an unfortunate situation result in a loss in income
Death
Protects the client’s spouse and 3 children from potentially
devastating financial losses even after client’s demise
To protect the client from unexpected, high medical costs;
and ensure that client receives the necessary treatments at
minimal cost
Medical/Hospitalisation
Most vital insurance for client, especially since client has
existing medical conditions
Critical Illness
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Insurance Overview
SUGAR
MUMMY
Our client currently has coverage for 3 key areas – Death, TPD & Critical Illness
Coverage
Company
Plan
NTUC Income
Direct Star
Protect
Death
TPD
CI
$63,000
$63,000
$63,000
$30,000
$30,000
-
$93,000
$93,000
$63,000
(Whole Life Plan)
Prudential
PRUlife
Multiplier 7th
Series
(Whole Life Plan)
TOTAL
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Compare and Contrast
SUGAR
MUMMY
To identify the shortfalls in our client’s existing insurance policies
Coverage
Required Coverage*
Existing Coverage
Gap
Shortfall/Surplus
Death
$605,321.42
$93,000
($512,321.42)
Shortfall
TPD
$605,321.42
$93,000
($512,321.42)
Shortfall
CI
$605,321.42
$63,000
($542,321.42)
Shortfall
ECI
$441,883.04
$0
($441,883.04)
Shortfall
Personal
Accident
$172,500.00
$0
($172,500.00)
Shortfall
*Required Coverage = Lump sum required + Total liabilities – Amount set aside
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Gaps in Client’s Existing Insurance Coverage
SUGAR
MUMMY
White our client is partially covered for Death, TPD & CI, crucial areas like ECI & Personal Accident were severely overlooked
Partially Covered
DEATH
No Coverage
Partially Covered
ECI
TPD
Partially Covered
PERSONAL
ACCIDENT
No Coverage
CI
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Proposal of Supplementary Insurance Policies
SUGAR
MUMMY
We propose multiple insurance policies that will provide our client with full coverage in the necessary areas
Death, TPD
FWD Term Life Plus + TPD Rider
CI & ECI
Personal Accident
AXA Super CritiCare
AXA Band Aid + Medical Expenses
& Accident Medical
Reimbursement Riders
Key Features:
Key Features:
Key Features:
•
Sum assured
• Death & Terminal Illness:
$550,000
• TPD: $550,000*
•
•
•
•
•
Coverage till 70 years old except TPD
Sum assured: $550,000
Benefits:
• Multiple coverage for early,
intermediate and advanced
stage critical illness
•
Coverage till 75 years old
Sum assured: $200,000
Coverage till 75 years old
*TPD benefit will end at the age of 65
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Compare and Contrast
SUGAR
MUMMY
With the added insurance policies, our client is now fully covered in the previously lacking areas
Coverage
Required Coverage*
Existing Coverage
Improved Coverage
Remarks
Death
$605,321.42
$93,000
$643,000
Boost Coverage
TPD
$605,321.42
$93,000
$643,000
Boost Coverage
CI
$605,321.42
$63,000
$613,000
Boost Coverage
ECI
$441,883.04
$0
$550,000
Full Coverage
Personal
Accident
$172,500.00
$0
$200,000
Full Coverage
*Required Coverage = Lump sum required + Total liabilities – Amount set aside
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Risk Profiling
Risk Profile, Strategic Asset Allocation
Risk Ability
SUGAR
MUMMY
Ability to sustain losses without a significant impact on his lifestyle
RISK ABILITY SCORE OF 23
Medium Risk Ability
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Risk Ability
SUGAR
MUMMY
Ability to sustain losses without a significant impact on his lifestyle
Category
Client's Perspective
Our Perspective
Free Assets
< 20%
Agree.
Time Horizon
Between 3 and 5 Years
Disagree. Client wants to retire at age
60 and has more than 12 years.
Retirement Coverage
Between 30% and 60%
Agree.
Disagree. Total annual investible
savings is high to free assets (> 20%).
Annual net savings / Cash available
to invest =
$28,602 / $16,500 = 173%
Loss Compensation
< 2%
Capital Erosion
< 2 Years
Agree. Relatively low free assets to high
cash outflow.
Future Liabilities and Plans
Between 0% and 20%
Agree. Client only has mortgage
payments to pay off.
Total Score
23 (Medium)
36 (Enhanced)
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Risk Tolerance
SUGAR
MUMMY
Ability to emotionally deal with investment risks and losses
RISK TOLERANCE SCORE OF 13
Medium Risk Tolerance
Category
Client's Perspective
Experience
Between 1 and 3 Years
Interest in Markets
Rarely
Expectations on Riskier
investments
Slightly Disagree
Risk Appetite / Awareness
Around 50%
Comfort / Loss Sensitivity
Maintain Current Positions
Total Score
13 (Medium)
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Risk Profile
SUGAR
MUMMY
Risk Ability + Risk Tolerance = Risk Profile
Enhanced Risk Ability
Medium Risk Tolerance
Medium Risk Profile (Lower of the 2)
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Strategic Asset Allocation
SUGAR
MUMMY
Based on Medium Risk Profile
Asset Allocation
Cash,
Alternative 5%
Investments,
15%
Bonds,
35%
Equities,
45%
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Market Outlook
United States, Japan, China, Singapore, India, Germany, Russia, United Kingdom, South Korea, Indonesia
Summary of Market Outlook
SUGAR
MUMMY
Overweight Countries: Japan, China, Singapore, Indonesia
Country
GDP
Growth
Inflation
Expectation
Monetary Policy
Stance
Overall
Outlook
Equities
Fixed
Income
Currency
(against SGD)
United States
4.6%
3.4%
Tightening
❌
❌
❌
Appreciate
Japan
2.8%
0.8%
Maintain
✅
✅
✅
Depreciate
China
5.4%
2.7%
Easing
✅
✅
✅
Depreciate
Singapore
4.7%
1.7%
Tightening
✅
❌
✅
-
India
7.5%
5.6%
Tightening
❌
❌
❌
Depreciate
Germany
1.8%
5%
Easing
➖
❌
✅
Depreciate
Russia
-4.6%
20%
Tightening
❌
❌
❌
Depreciate
United Kingdom
4.6%
4.6%
Tightening
➖
❌
❌
Appreciate
South Korea
2.1%
2.2%
Easing
➖
❌
❌
Depreciate
Indonesia
5.0%
2.8%
Tightening
✅
✅
❌
Depreciate
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Selection of Equity Market
Japan, China, Singapore, Indonesia
Comparing the valuations and growth of overweight countries
SUGAR
MUMMY
Japan has the most favourable outlook based on the factors of consideration
GDP
Inflation
Interest
Countries
Growth Expectation
Rate
CLIENT ANALYSIS
2.8%
0.80%
-0.10%
5.4%
2.70%
3.70%
4.7%
1.7%
0.33%
5.0%
2.80%
3.50%
INSURANCE
Forward
P/E
RISK PROFILE + SAA
Local Index
Investment
Clock Phase
Current
Target (2022)
TOPIX
TOPIX
TOPIX
14.070
1981.00
2140
CSI 300
CSI 300
CSI 300
15.400
4174.57
5500
STI
STI
STI
21.557
3413.69
3500
Post Recovery
IDX
IDX
18.560
7029.08
-
Post Recovery
MARKET OUTLOOK
FUND SELECTION
Recovery
PostRecession
CONCLUSION
Comparing the valuations and growth of overweight countries
SUGAR
MUMMY
Japan has the most favourable outlook based on the factors of consideration
Rating Scorecard
(1 being lowest,
4 being highest)
1
Worst
Performing
CLIENT ANALYSIS
GDP
1
3
2
4
Inflation
4
3
1
2
Interest Rate
4
1
3
2
Forward P/E
4
3
1
2
Total
13
10
7
10
4
Best
Performing
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Favourable environment for Japanese equities
SUGAR
MUMMY
Based on GDP Growth, Valuation, and Investment Clock Phase
GDP Growth and Inflation
•
•
Despite delayed economic recovery,
Japan maintained a relatively low level
of inflation rate at 0.54%
•
BOJ aims to maintain its massive
stimulus and promote growth to
recover from a fragile economy due to
the Ukraine crisis
CLIENT ANALYSIS
INSURANCE
Interest Rate and Investment Clock
Phase
Valuation – Forward PE and Index Target
Japan has the lowest forward PE of 14.070
as compared to China, Singapore and
Indonesia with forward PE of 15.400, 21.557
and 18.560 respectively, resulting in it being
the most undervalued
•
There is an expected increase in the TOPIX
index from current level of 1981 to 2140 by
the end of 2022, resulting in bullish outlook
on Japan equities
•
Limited downside: An increase or
decrease in export demands could lead to
a 19% upside to 2300 or 7% downside to
1800 respectively
RISK PROFILE + SAA
MARKET OUTLOOK
•
Evident from the negative interest rate of 0.10%, Japan is still in the recovery phase
from Covid-19
•
BOJ is unlikely to intervene with a policy rate
hike even with a weaker JPY, as well as the
public concern of increasing import prices of
food and energy, especially so when low
inflation persists
•
This encourages investors to move more
money to the equity market and increase
investment
FUND SELECTION
CONCLUSION
Macroeconomic Factors Favoring Japanese Financials
SUGAR
MUMMY
International Opportunities, Ageing Population and COVID-19 Recovery
Expansion into International Markets
•
•
•
Japanese Banks are sitting on recordhigh levels of cash and are expanding
into overseas operations
In the case of MUFG, net foreign interest
income contributes about 40 percent of
the group’s net revenues
Expanding overseas will help mitigate
the threat of an aging population
CLIENT ANALYSIS
INSURANCE
Maturing Population and Growing Assets
•
•
At 84.36 years, Japan enjoys one of world's
longest life expectancies. Although Japan's
population is aging and thus shrinking, this
presents opportunities in the financials sector
Two-thirds of Japanese household financial
assets are held by those aged 60 or older, with
amounts of up to $17 trillion (and growing) of
household assets that can be handled by estate
planning, inheritance and wealth advisory
RISK PROFILE + SAA
MARKET OUTLOOK
Strong Rebound from Covid-19
• Japan’s GDP growth to rebound to 2.3% in 2021
and accelerate to 2.8% in 2022.
• Japan’s vaccination rate is still increasing even
after surpassing rates in the US and Europe, with
about 80% of the population receiving 1 dose and
75% receiving 2 doses
• Forced savings of ¥34 trillion expected to be
deployed as pent-up spending, driving up
consumer demand which could potentially drive
activity in financials through borrowing and
lending
FUND SELECTION
CONCLUSION
Upside Potential in Japanese Bank and Financials Sector
SUGAR
MUMMY
Appealing Valuations, Strong Earnings, Cost Efficiencies
Favorable Valuation Percentile
•
•
Rising Real Yields are to be expected in 2022.
While cyclical sectors usually experience
tailwinds when US 10y real yields, rise,
financials have been resilient due to their netinterest margin/high yield curve sensitivity.
Correlation to US 10y real yield is high due
to high investor confidence in Japanese
financials, valuation percentile is still relatively
low among other industries, which suggests
that the market has not priced in for this factor
yet
CLIENT ANALYSIS
INSURANCE
Strong Core Earnings for 3 Majors
•
•
•
Performance was strong in customer-facing
operations, which is supported by higher
momentum in commissions from financial products
sales and corporate commissions from M&A
Loan-deposit spreads to widen and expected core
earnings (net business profits) to widen due to
recovery from COVID-19 pandemic through
resumption of sales of financial products and credit
card and financing operations
26Q3 Earnings for 3 major banks to rise above
4,000b yen
RISK PROFILE + SAA
MARKET OUTLOOK
Bank Cost Efficiencies
• Expense Ratio for Major Japanese banks to fall
from 62.3% to 58.6% in 2023 due to cost
structure reforms
• Example of SMFG investing in digitalization its
services to reduce its fixed costs and improve its
service efficiency. Other banks are also
developing more lightweight IT systems and
implementing a more agile (less perfectionist
and more efficient) business culture
FUND SELECTION
CONCLUSION
Selection of Bond Market
Japan, China, Singapore, Indonesia
EM credit forecasted to perform better than DM credit in 2022
Promising growth outlook for Emerging/Asian credit
EM Real GDP to Grow at Double the Pace of DM
Reasonably Favorable Environment for Asian Credit
•
•
•
•
The International Monetary Fund (IMF) forecasts that EM economies will
continue to see strong post-COVID growth over the next five years
Base case expectation for emerging market growth looks to be 5.1% in
2022, helped mostly by the impact of economic reopening
Emerging market growth alpha measure estimates only a 1.4% premium
over developed markets in 2022, largely due to strong developed market
growth
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
SUGAR
MUMMY
•
•
•
Growth outlook in Asia appears more promising compared to
many emerging markets and some developed ones
In Asia, Covid-related fiscal and monetary impulses were not as
large as in other parts of the world
This has put a lid on inflation, releasing pressure on Asian
policymakers to tighten while their counterparts elsewhere do not
have this option
Furthermore, China high yield property may offer an attractive
risk-reward scenario to many investors, driven by the extremely
wide valuations
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Comparing the valuations and growth of overweight countries
SUGAR
MUMMY
Favourable credit environment, monetary stance and low debt-to-GDP ratio are preferred
Country
CLIENT ANALYSIS
GDP
Growth
Inflation
Expectation
CBPR
Monetary
Policy Stance
Debt-to-GDP ratio
S&P Credit Rating
2.8%
0.80%
-0.10%
Maintain
237%
A+
5.4%
2.7%
3.70%
Easing
50.50%
A+
4.7%
1.7%
0.33%
Tightening
126%
AAA
5.0%
2.8%
3.50%
Tightening
29.80%
BBB
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Comparing the valuations and growth of overweight countries
SUGAR
MUMMY
China has the most favourable credit outlook based on three factors of consideration
Rating Scorecard
(1 being lowest,
4 being highest)
1
Worst
Performing
CLIENT ANALYSIS
Monetary
Policy Stance
1
4
2
4
Debt-to-GDP
ratio
1
3
2
4
S&P Credit
Rating
3
3
4
1
Total
5
10
8
9
4
Best
Performing
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Favourable environment for China Fixed Income
SUGAR
MUMMY
Based on diverging monetary policy and diversification benefits
Diverging policy initiatives between China and the DM have
created a positive backdrop for Chinese assets
Potential to Offer Attractive Income and Diversification
benefits
Attractive income – the
majority of the global fixed
income yielding more than
2.5% is in China
•
•
•
•
China is the only major economy swimming against the
global tide of tightening monetary policies
The government has cut key rates to reduce borrowing
costs, sending the bond yields to the lowest since mid
2020
Inflation is less of a concern for monetary and fiscal
authorities in China as its core consumer prices only rose
by 1.2% in 2021
This contrarian policy stance makes Chinese fixed
income more attractive because investors want to buy
bonds before further rates decline
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
•
•
•
•
•
The diversification potential is due to the low correlations
between China and DM and onshore RMB and offshore
Chinese USD credit markets
Onshore RMB and offshore Chinese USD credit markets are
driven by different fundamental factors
Onshore RMB bond market is sensitive to Chinese policy
Offshore USD Chinese Fixed Income is sensitive to US
interest rate risk
Onshore RMB credit can serve as a hedge in a risk off
environment
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Higher Growth for China HY compared to China IG
SUGAR
MUMMY
China HY credit will benefit more from monetary policy easing measures
Long China HY over China IG
Neutral on China IG
China IG priced closer to fair
value compared to China HY
Spreads for investment grade
corporates
and
financials
remain
tight
as
weaker
sentiment has resulted in a flight
to quality.
Overweight on Lower quality HY
Weaker China HY credits will
benefit the most from policy
easing measures
Spread differential between China HY and China IG is over 2,200bp, which is
the highest since 2013. The yield differential has been climbing steeply over
the last few months, indicating investors' lack of confidence in the market.
Downside for HY credit is more
limited as higher quality China
HY was down 20pts while
weaker credit was only down
16pts.
However, valuation wise, the risk-reward continues to be supportive of
China HY over China IG.
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Market is underpricing China HY Bonds
SUGAR
MUMMY
China HY credit is oversold based on fundamentals; onshore bonds have a lower default risk
Corporate Default Rate set to increase
Onshore bonds are safer with lower likelihood of default
Fitch Ratings believe that China’s
corporate bond default rate will
be driven mostly by privately
owned property developer defaults
in 2022
(more maturities for China onshore and
offshore corporate bonds)
GS maintained a forecast for highyield developer's default rate of 19%
for 2022, with a bull case of 10.5%
and a downside case of 31.6% if
credit stress picks up.
… but HY Bonds are still underpriced
Even with a downside case of 31.6%,
the credit market is pricing close to
57% default rate for the property
sector.
Previous problem sectors' cumulative
default rates has never been higher
than 35%
This presents a buying opportunity
for HY Bonds as excessive fears are
priced in
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
Bloomberg’s China Credit Tracker shows that distress in the nation’s
$870 billion offshore debt market remained elevated during February.
Returns on dollar bonds remain close to their lowest level in nearly
two years while the significantly larger onshore market showed signs
of stabilizing.
Because of a low credit stress, onshore bonds are likely to be more
resilient to micro events, like a high-profile default.
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Opportunities from Stabilizing Property Market
SUGAR
MUMMY
Expect more pro-property measures to be introduced in 2022 to boost property market
HY Bonds are expected to rebound
With 13% of China HY bonds trading below 50 cash price, the market is underestimating
the resolve and ability of policy-makers to control property market
disruption. Investors are waiting for more evidence of policy support, keeping valuations
depressed.
However, home prices are expected to rise 2% this year as curbs are relaxed. Although
China's property market is expected to stay soft in the first half of 2022, it is expected to
rebound later in the year as policies aimed at encouraging buyers helps sentiment
recover.
Relaxation of Property Loans
Financial
regulators
have
informed
banks
to
specifically
provide
more
loans
to
property developers and accelerate approval of loans
to develop projects, and to ensure that
outstanding loans to project development show
growth in their loan books
Borrowing by major property firms used to
fund mergers and acquisitions will no longer be
counted toward the “three red lines” metrics that limit
debt
CLIENT ANALYSIS
INSURANCE
More Property M&A Deals
Stimulating Property Sales
Many stronger developers show willingness to buy
distressed assets from cash-strapped peers. Chinese
state-owned property firms are also expected to
acquire more assets from cash-strapped private
developers this year.
Authorities have unveiled a slew of measures to
boost
sales
and
sentiment,
including
giving developers' easier access to escrowed presale funds, requiring smaller down-payments for firsttime home buyers, and allowing commercial banks to
lower mortgage rates.
This will send a positive signal to the market and
ease the cash crunch of sellers.
RISK PROFILE + SAA
MARKET OUTLOOK
Investment by real estate firms is expected to fall 2
per cent in the first half and gain 1.5 per cent for
the whole year.
FUND SELECTION
CONCLUSION
Selection of Currency
Japan, China, Singapore, Indonesia
Currency Selection - SGD
SUGAR
MUMMY
Currency Outlook
Tightening Monetary Policy
• Upside risks to core inflation in 2022, arising from
the impact of pandemic-related and geopolitical
shocks and global supply chains
• This is expected to spur further policy tightening,
which would also mean steepening the slope of
appreciation of the SGD
• Barclays Bank also expect the widening and
recentering of the S$NEER policy band – which
could lead to a significant SGD appreciation
against Singapore’s main trading partners
CLIENT ANALYSIS
INSURANCE
Rising S$NEER Policy Band
• S$NEER is expected to gain ~3.0% from current
levels to year-end, with its strength to be frontloaded
• It is forecasted for it to climb 30 – 40 basis points
to near the top of the band, when nearing the April
policy review, and gain another 150 basis points if
it tracks the expected re-centering move in April
• Hence, SGD is expected to rise against currencies
of major trading partners
RISK PROFILE + SAA
MARKET OUTLOOK
Weaking Chinese Yuan
• China is one of Singapore’s largest trading
partners
• Recently, the PBOC made a push to weaken the
yuan as virus-related curbs and rising commodity
prices threatened to slow the economy, and CNY
is expected to weaken by 3 – 5% in 2022
• Hence, a tightening monetary policy by MAS and
the depreciation of the Chinese yuan makes the
SGD a strong and attractive currency for
investors to hold
FUND SELECTION
CONCLUSION
Funds Selection
Equity
Mode of Entry: Funds over Direct Investments
SUGAR
MUMMY
We recommend Funds over Direct Investments due to the following benefits
1
4
Portfolio Diversification
•
Gain exposure to variety of shares across various sectors,
Benefits of High Liquidity
•
where performing funds can compensate the ones that do not
2
•
any time, based on NAV at that point in time
5
Variety of Choices
Professional Management
•
Wide range of funds available, with exposure to different asset
classes and geographical locations
3
6
Funds take advantage of their large transaction volumes to
minimize transaction costs for investors.
CLIENT ANALYSIS
INSURANCE
Managed by qualified and professional expertise and thus,
investors can be assured their investments are in good hands
Economies of Scale
•
Open-ended funds allow investors to buy and sell their funds at
Convenient Administration
•
Investment decisions are left to a professional fund manager,
thus making it easy and less time-consuming for investors
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Entry Selection
SUGAR
MUMMY
Active Management is preferred to tide through this period of uncertainties
AIM
To outperform the market in good times and help protect investments in bad times
PERFORMANCE
To capitalize on market conditions to increase returns, greater opportunities for
alpha generation, as opposed to passive management
In view of the recent upheaval in global markets - persistent inflation, Fed rate hikes, Russian-Ukraine
conflicts, rising commodity prices and higher labor costs; passive investors may face a tougher sledding in
the coming year.
These developments could mean increased complexity in markets. Therefore, it would be more feasible to
take on an active fund management approach – where investors should consider neutralizing extreme and
concentrated positions while striving for diversification through equities, fixed income and currency.
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Equity Fund Selection Criteria
SUGAR
MUMMY
Selected the top 3 funds based on our considerations
Equity Fund must be available in Singapore
123 FUNDS
ASIAN EQUITY FUNDS
HIGH EXPOSURE TO
JAPAN FINANCIALS
Significant exposure to
Asia-Pacific with an
overweight in Japan
Funds with high
(>80%) exposure to Japan
Funds with around
10% exposure to Financials
3 FUNDS
SGD DENOMINATION
AND HEDGED
•
SGD is expected to appreciate
while Japan Yen is expected
to depreciate in 2022
QUANTITATIVE AND
WeQUALITATIVE
compare our top 3 picks
to determine
an optimal
FACTORS
choice
Compare top 3 funds
Filtering Process
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Equity Fund Structure
SUGAR
MUMMY
Overview of 3 selected funds; EastSprings is the most relevant to our investment objectives
EASTSPRING
INVESTMENTS –
JAPAN DYNAMIC FUND AS
SGD-H
LIONGLOBAL JAPAN
GROWTH FUND SGD-H
NIKKO AM JAPAN DIVIDEND
EQUITY SGD-H
MSCI JAPAN INDEX
The fund aims to generate
long-term capital growth
using a portfolio mix of
equities, bonds, and
currencies.
The fund aims to provide
long-term capital growth of
assets of the Fund by
investing primarily in
small securities, with no
target industries or sectors
The fund aims to provide a total
return of capital growth and
income over the medium to long
term by investing in equities from
companies with stable cash flows,
growth and dividend payouts.
-
Allocation to Japan
100%
100%
96.3%
100%
Allocation to
Financials
21.7%
9.4%
11.2%
10.28%
Investment
Objective
EASTSPRING INVESTMENTS - JAPAN DYNAMIC FUND
It has the largest allocation to Japan and Financials, thus closest to our investment objectives.
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Quantitative Analysis: Performance Comparison
SUGAR
MUMMY
EastSpring has the highest 1Y returns; LionGlobal has the highest 3Y returns
EASTSPRING INVESTMENTS
–
JAPAN DYNAMIC FUND AS
SGD-H
1Y Returns
5.83%
NIKKO AM JAPAN DIVIDEND
EQUITY SGD-H
1.96%
0.50%
-5.0%
1Y MSCI Japan Index
3Y Annualized Returns
LIONGLOBAL JAPAN GROWTH
FUND SGD-H
9.51%
12.30%
7.76%
7.20%
3Y MSCI Japan Index
•
1Y Returns: All three funds outperformed compared to the index fund, with EastSpring Investments having the
highest return.
•
3Y Returns: All three funds outperformed compared to the index fund, with LionGlobal having the highest return.
Analysis
EASTSPRING INVESTMENTS - JAPAN DYNAMIC FUND
LIONGLOBAL JAPAN GROWTH FUND SGD-H
Highest 1Y returns
Highest 3Y returns
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Quantitative Analysis: Risk-Adjusted Return Comparison
SUGAR
MUMMY
LionGlobal outperforms EastSpring and Nikko AM for risk-adjusted return
CATEGORY AVERAGE:
EASTSPRING
INVESTMENTS –
JAPAN DYNAMIC FUND
AS SGD-H
LIONGLOBAL JAPAN
GROWTH FUND SGD-H
NIKKO AM JAPAN
DIVIDEND EQUITY SGDH
3Y Alpha
0.33
-1.05
1.93
-0.73
5Y Alpha
0.37
-1.97
1.41
-0.51
3Y Sharpe Ratio
0.37
-0.19
1.1
0.49
5Y Sharpe Ratio
0.35
0.25
1.44
0.87
3Y Annualized Volatility
15.16%
22.47%
15.47%
13.88%
Alpha: LionGlobal has the highest 3Y and 5Y Alpha among the 3 funds
Analysis
Sharpe Ratio: LionGlobal has the highest 3Y and 5Y Sharpe Ratio among the 3 funds
3Y Annualized Volatility: Currency risk of all 3 funds are minimised as all funds are hedged to SGD. EastSpring
has the highest 3Y Annualized Volatility at 22.47%
LIONGLOBAL JAPAN GROWTH FUND
It has the highest risk-adjusted return as it has the highest Sharpe ratio and has generated Alpha.
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Quantitative Analysis: Fee Comparison
SUGAR
MUMMY
LionGlobal outperforms EastSpring and Nikko AM in terms of cost with the lowest expense ratio
EASTSPRING INVESTMENTS
–
JAPAN DYNAMIC FUND AS
SGD-H
LIONGLOBAL JAPAN GROWTH
FUND SGD-H
NIKKO AM JAPAN DIVIDEND
EQUITY SGD-H
Front-End Load
Up to 5.00% (free on FSM)
Up to 5.00% (free on FSM)
Up to 5.00% (free on FSM)
Management Fee
1.59%
1.40%
1.50%
Total Expense Ratio
1.60%
1.50%
1.71%
LIONGLOBAL JAPAN GROWTH FUND
It has the lowest management fee and total expense ratio among these 3 funds.
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Qualitative Analysis: Reputation of Fund Manager and Company
SUGAR
MUMMY
Nikko AM has the largest AUM while EastSpring has the highest 1Y fund manager return
Company
Credentials
EASTSPRING INVESTMENTS –
JAPAN DYNAMIC FUND AS SGD-H
LIONGLOBAL JAPAN GROWTH
FUND SGD-H
NIKKO AM JAPAN DIVIDEND EQUITY
SGD-H
Eastspring Investments, part of Prudential
plc, is a global asset manager with Asia at its
core. Over the last 25 years, they have built
an unparalleled on-the-ground presence in
11 Asian markets as well as distributions
offices in North America and Europe.
Establish in Singapore since 1986,
LionGlobal is a part of Great Eastern
Holdings, as well as a member of the
OCBC group. Their core competencies are
in managing Asian fixed income, equity and
multi-asset strategies for both institutional
and retail investors.
Nikko Asset Management is one of Asia’s largest
asset managers, present in 11 countries with
more than 300 banks and brokers distributing its
products. Their complementary range of passive
strategies covers more than 20 indices and
includes some of Asia’s largest ETFs.
• AUM: US$258 Billion
• AUM: US$52.4 Billion
• AUM: US$282.5 Billion
Dean Cashman
•
•
•
Portfolio Manager
Industry Experience: 32 years
1Y return: 14.0%
Previous Experience: Ex-Head
of Japanese equities for BT
Fund Managers (Sydney)
Wee Ban Yew
•
•
•
Toshinori Kobayashi
Industry Experience: 25 years
1Y return: 2.1%
Previous Experience:
Assistant Manager of
Investments at DBS Asset
Management
•
•
•
Industry Experience: 34 years
1Y return: 7.7%
Previous Experience: Ex- team
leader of Market-Oriented Portfolio
Management
EASTSPRING INVESTMENTS - JAPAN DYNAMIC FUND
NIKKO AM JAPAN DIVIDEND EQUITY
Portfolio manager Dean Cashman has highest 1Y return of 14.0%.
Huge global presence with the largest AUM of US$282.5 Billion.
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Overall Evaluation
SUGAR
MUMMY
EastSpring has the best overall fund based on our considerations
Rating Scorecard
(1 being lowest, 3 being highest)
Eastspring Investments –
Japan Dynamic Fund AS
SGD-H
LionGlobal Japan Growth
Fund SGD-H
NIKKO AM JAPAN
DIVIDEND EQUITY SGD-H
Fund Structure and Relevance of
Investment Objectives (35%)
3
1
2
Fund Performance (25%)
3
3
1
Risk Adjusted Return (20%)
1
3
2
Fees and Expenses (10%)
2
3
1
Reputation of Fund Manager and
Company (10%)
3
1
3
2.5
2.1
1.75
Total (100%)
1
Worst
Performing
CLIENT ANALYSIS
3
Best
Performing
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Funds Selection
Fixed Income
Fixed Income Fund Selection Criteria
SUGAR
MUMMY
Selected the top 3 funds based on our considerations
Bond Fund must be available in Singapore
130 FUNDS
ASIAN HIGH YIELD
BOND FUNDS
To capitalize on the
relatively
favorable Asia credit
environment
HIGH EXPOSURE TO
CHINA CORPORATES
Funds with at least
30% exposure to China
Funds with at least
25% exposure to property
3 FUNDS
SGD DENOMINATION
AND HEDGED
•
SGD is expected to appreciate
while Chinese Yuen is expected
to depreciate in 2022
QUANTITATIVE AND
WeQUALITATIVE
compare our top 3 picks
to determine
an optimal
FACTORS
choice
Compare top 3 funds
Filtering Process
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Fixed Income Fund Structure
SUGAR
MUMMY
Overview of 3 selected funds; Fidelity is the most relevant to our investment objectives
FIDELITY FUNDS – CHINA
HIGH YIELD FUND AMINCOME(G)-SGD(hedged)
ALLIANZ DYNAMIC
ASIAN HIGH YIELD
BOND CL AMG
DIS H2-SGD
BLACKROCK ASIAN HIGH YIELD
BOND A2 SGD-H
JACI INDEX
Investment
Objectives
The fund seeks a high level of
current income by investing
primarily in high-yielding, subinvestment grade or non-rated debt
securities of issuers that have their
head office or exercise a majority of
their activity in the Greater China
region.
To provide investors
with long-term capital
appreciation and
income through
investing primarily in
USD denominated
Asian debt markets.
Seeks to maximize total return by
investing at least 70% of its total assets in
high yield fixed income transferable
securities, denominated in various
currencies, issued by governments and
agencies of, and companies domiciled in,
or exercising the predominant part of their
economic activity in the Asia Pacific
region.
-
Allocation to
Mainland China
55.93%
35.8%
33.56%
Allocation to
Property
33.93%
31.1%
25.35%
39.19%
36.13%
FIDELITY FUNDS – CHINA HIGH YIELD
Fidelity has the largest allocation to China and real estate, thus closest to our investment objectives
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Quantitative Analysis: Performance Comparison
SUGAR
MUMMY
BlackRock has consistently outperformed the other funds; Fidelity outperformed its index by a huge margin
Fidelity Funds - China High
Yield Fund A-MINCOME(G)SGD(hedged)
ALLIANZ DYNAMIC ASIAN HIGH YIEL
D BOND CL AMG DIS H2-SGD
BLACKROCK ASIAN HIGH YIEL
D BOND A2 SGD-H
1Y Returns
-29.02%
-29.41%
-26.02%
1Y Index Returns
ICE BofA Asian Dollar High Yield Corporate China
Issuers
JP Morgan Asia Credit Index (JACI) Non-Investment Grade
-20.1%
-45.8%
3Y Annualized Returns
-6.65%
3Y Annualized Index Returns
-13.8%
Analysis
-11.6%
-3.72%
-15.8%
•
1Y Returns: Fidelity has significantly higher returns (lower losses) as compared its index while Allianz and
Blackrock underperformed compared their index. In terms of absolute loss, Blackrock is the lowest.
•
3Y Returns: All three funds outperformed compared to the index fund. BlackRock had the highest relative
outperformance.
FIDELITY FUNDS – CHINA HIGH YIELD
BLACKROCK ASIAN HIGH YIELD BOND
Outperformed its index by a huge margin
Lowest 1Y and 3Y losses
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Quantitative Analysis: Risk Comparison
SUGAR
MUMMY
BlackRock has the lowest overall risk; Fidelity has the highest interest rate risk and country risk
Fidelity Funds - China High
Yield Fund A-MINCOME(G)SGD(hedged)
ALLIANZ DYNAMIC ASIAN HIGH YI
ELD BOND CL AMG DIS H2-SGD
BLACKROCK ASIAN HIGH YIEL
D BOND A2 SGD-H
Effective Duration
2.9
2.64
2.5
3Y Annualized Volatility
12.97%
13.13%
12.15%
Average Credit Rating
BB
BB
BB
FSM Risk Rating
6
5
5
Analysis
Interest Rate Risk
Currency Risk
Credit Risk
Fidelity has the largest interest rate risk as it has the longest effective duration of 2.9 years. However, this can be advantageous
given the predicted interest rate reduction in China, where Fidelity would benefit the most in terms of price appreciation.
Minimised as all funds are hedged to SGD.
Fidelity has a more than 50% allocation to China, indicating a higher country risk. However, this can be advantageous given
the good prospects based on our analysis.
All funds have a similar average credit rating, but Allianz has the highest annualised volatility.
FIDELITY FUNDS – CHINA HIGH YIELD
Despite its risk, it has the highest potential for strong returns given our favourable outlook of China
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Quantitative Analysis: Risk-Adjusted Return
SUGAR
MUMMY
Fidelity outperforms Blackrock and Allianz for all three metrics
CATEGORY
AVERAGE:
GREATER CHINA
Fidelity Funds China High Yield
Fund AMINCOME(G)SGD(hedged)
ALLIANZ DYNAMIC ASI
AN HIGH YIELD BOND
CL AMG DIS H2-SGD
CATEGORY
AVERAGE: ASIA
HIGH YIELD
BLACKROCK ASIAN
HIGH YIELD BOND A
2 SGD-H
1Y Alpha
3.72
1.69
-6.48
-2.31
-2.64
3Y Alpha
2.62
3.87
-5.69
-2.03
-
1Y Sharpe Ratio
-1.67
-2.29
-2.16
-1.6
-1.85
3Y Sharpe Ratio
-0.45
-0.56
-0.68
-0.36
-
1Y Information Ratio
1.88
2.04
-1.90
-0.65
-1.93
3Y Information Ratio
0.92
1.2
-1.83
-0.48
-
Analysis
Alpha: Only Fidelity has achieved a positive alpha. Although 1Y alpha is lower than index, 3Y alpha outperformed
the index. Despite negative alpha, Allianz and Blackrock underperformed compared to the index.
Sharpe Ratio: All three funds underperformed compared to their indexes.
Information Ratio: Fidelity consistently exceeded the benchmark information ratio, indicating that it is performing
well relative to other similar funds
FIDELITY FUNDS – CHINA HIGH YIELD
Despite having the highest risk, it is the only fund that has generated alpha and consistently outperformed the benchmark.
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Quantitative Analysis: Fee Comparison
SUGAR
MUMMY
Blackrock has the lowest fees; Fidelity has the highest fees
Fidelity Funds - China High
Yield Fund A-MINCOME(G)SGD(hedged)
ALLIANZ DYNAMIC ASIAN HIGH YI
ELD BOND CL AMG DIS H2-SGD
BLACKROCK ASIAN HIGH YIEL
D BOND A2 SGD-H
Front-End Load
Up to 3% (free on FSM)
Up to 5% (free on FSM)
Up to 5% (free on FSM)
Management Fee
1.2%
1.25%
0.7%
Total Expense Ratio
1.6%
1.55%
0.91%
BLACKROCK ASIAN HIGH YIELD BOND
Despite a slightly higher sales charge of 5%, it has the lowest annual expense ratio of 0.91%, which lowers longer-term expenses.
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Qualitative Analysis: Reputation of Fund Manager and Company
SUGAR
MUMMY
Blackrock is the most reputable company with the most experienced fund manager
Company
Credentials
Fidelity Funds - China High Yield Fund
A-MINCOME(G)-SGD(hedged)
ALLIANZ DYNAMIC ASIAN HIGH YIEL
D BOND CL AMG DIS H2-SGD
BLACKROCK ASIAN HIGH YIELD BOND A
2 SGD-H
Founded in 1946, Fidelity has evolved into a
significant force in the online brokerage
space. Fidelity has consistently offered
investors high value with excellent research,
useful tools, and extensive educational
resources in 9 other countries across North
America, Europe, Asia, and Australia.
Since 1910, Asia is one of the core growth
regions for Allianz. Today, Allianz is active
in 14 markets in the region, offering its core
businesses of property and casualty
insurance, life, protection and health
solutions, as well as asset management.
BlackRock is one of the world’s leading providers
of investment, advisory and risk management
solutions. Present in 70 offices over 30 countries,
BlackRock offers a range of solutions designed to
gain broad exposure to the world’s capital
markets.
• AUM: US$4.5 trillion
• AUM: US$743.329 billion
• AUM: US$9.496 trillion
Peter Khan
•
•
•
Portfolio Manager
Industry Experience: 22 years
1Y Performance: -7.6%
Previous Experience: Worked at
Bayerische Hypo-undVereinsbank as the head of
trading for the London Eurobond
desk
Mark Tay
•
•
•
Artur Piasecki
Industry Experience: 9 years
1Y Performance: -26.2%
Previous Experience: Worked at
HSBC private bank and was in
charge of fixed income
investments for the
discretionary portfolio
management team
•
•
•
Industry Experience: 22 years
1Y Performance: -3.8%
Previous Experience: Worked at R3
Capitals responsible for the
management of Asian credit and
equity-linked portfolios
BLACKROCK ASIAN HIGH YIELD BOND
It has the largest global presence over 30 countries and asset under management of US$9.46 trillion. Portfolio manager Artur Piasecki has the best 1Y performance with
over 2 decades of experience in the industry.
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Overall Evaluation
SUGAR
MUMMY
Fidelity has the best overall fund based on our considerations
Fidelity Funds – China High
Yield Fund AMINCOME(G)SGD-(hedged)
ALLIANZ DYNAMIC ASIAN
HIGH YIELD BOND CL AMG
DIS H2-SGD
BLACKROCK ASIAN HIGH
YIELD BOND A2 SGD-H
Fund Structure and Relevance of
Investment Objectives (35%)
3
2
2
Fund Performance (25%)
3
1
3
Risk Adjusted Return (20%)
3
1
2
Fees and Expenses (10%)
1
2
3
Reputation of Fund Manager and
Company (10%)
2
1
3
2.7
1.3
2.45
Rating Scorecard
(1 being lowest, 3 being highest)
Total (100%)
1
Worst
Performing
CLIENT ANALYSIS
3
Best
Performing
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Conclusion
SUGAR
MUMMY
Overview of our client’s goal, intent and recommended actions
Tactical Asset Allocation (TAA)
Our Client’s Profile
Equity
Goal: To retire comfortably by age 60 with additional $3,000
per month excluding variable expenses
Intent: To build and diversify his investment portfolio so that
he can generate enough returns to retire comfortably
Mr. Sugar
Action: To invest and ensure a minimum of 5.43% ROI
while balancing risk appetite
Proposed Additional Insurance
Coverage
Death, TPD: FWD Term Life Plus + TPD
Rider
CI, ECI: AXA Super CritiCare
Personal Accident: AXA Band Aid +
Medical Expenses + Accident Medical
Reimbursement rider
Death, TPD, CI
Insufficient à Full Coverage
Sector: Bank and Financials
Fund Selected: Eastspring Investments – Japan Dynamic Fund AS SGDHedged
Strategic Asset Allocation
(SAA)
Risk Profile: Medium
Alternative
Investments,
15%
Fixed Income
Country: China
Sector: Property Market
Cash,
5%
Fund Selected: Fidelity Funds - China High Yield Fund A-MINCOME(G) –
SGD-Hedged
Bonds, 35%
Currency
Equities, 45%
Currency Selected: SGD
ECI, Personal Accident
Zero à Full Coverage
CLIENT ANALYSIS
Country: Japan
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
THANK YOU
Q&A
Appendices
Client Analysis
Client Profile, Financial Situation, Client Goals, Intent and Action
Appendix 1: Assumptions
SUGAR
MUMMY
Income, expenses & investment
Income
Expenses
•
•
•
•
•
•
Annual income remains at
$91,000 as client has maxed out
his pay range as a quality
engineer given his education level
Remain fully independent on
income and will not rely on
children for additional allowance
Enrolled to CPF LIFE
Enhanced Retirement Scheme
that will draw a
monthly retirement income
of $2,120 from age 65
Encash remaining CPF OA and
SA upon retirement
CLIENT ANALYSIS
INSURANCE
•
•
•
Investment
Variable expenses grows with •
inflation rate of 2% annually
The insurance premium remains
at $6,384 and will be paid out until
retirement
Mortgage loan is entirely paid
for
withtoCPF
Click
addOA
textand will be paid
off in the next 10 years.
No
future
liabilities
after
retirement
RISK PROFILE + SAA
MARKET OUTLOOK
All
investments
will
be
withdrawn upon retirement and
kept in cash in case of rainy days
FUND SELECTION
CONCLUSION
Appendix 2: Overview of CPF Balance and Retirement Forecast
SUGAR
MUMMY
Analysis of our client's CPF account
CPF Interest Rates
OA
SA
MA
2.5%
4.0%
4.0%
Assumptions
1. The CPF OA yearly calculations as per the
retirement account calculator includes
yearly mortgage payments of $15,400
for 10 years till mortgage is fully paid for
2. CPF Life Enhanced Retirement Scheme
and mortgage payments are fully paid up at
55 years old
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 3: Deriving Return on Investment for our client
SUGAR
MUMMY
Client requires a 5.43% ROI to meet his goal and retire comfortably
Require 5.43% ROI
Assumptions
•
•
•
•
•
•
Inflation rate remains at 2%
Salary increment is 0%
Variable outflow increases with inflation rate of 2% annually
As per IRAS, Income tax is $4,615: $3,350 for the first $80,000 and 11.5% on the remaining $11,000
Family allowance be reduced from $19,800 to $10,000 in 2027, after children starts working
Education costs of $180 will be dropped beginning in 2027 when children complete their education
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
PV of free
assets when
retired at 60
$1,025,187.98
PV of
retirement net
outflows
$1,024,793.41
Surplus
394.57
FUND SELECTION
CONCLUSION
Insurance
Insurance Prioritization, Existing Coverage, Proposal of Supplementary Insurance
Appendix 4a: Client’s Existing Insurance Coverage
SUGAR
MUMMY
Our client currently has coverage for 3 key areas – Death, TPD & Critical Illness
Individual Protection
Plan
NTUC Income Direct
Star Protect (Whole
Life Plan)
Plan Details
✓ Coverage for whole life
✓ Total and permanent
disability protection
(before age 65)
Coverage (Sum Assured)
Premium Terms
• Death: $63,000
• TPD: $63,000
• Critical Illness: $63,000
• S$150 premium
payable monthly until
69 years old
• Death: $30,000
• TPD: $30,000
• Enrolled at 38 years
old, S$175.72
premium payable
monthly until 53 years
old
✓ Terminal illness
protection
✓ Regular premium
payment
Prudential PRUlife
Multiplier 7th Series
(Whole Life Plan)
CLIENT ANALYSIS
✓ Coverage for whole life
✓ Total and permanent
disability protection
✓ Regular premium payment
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 4b: Client’s Existing Insurance Coverage
SUGAR
MUMMY
Our client currently has coverage for 3 key areas – Death, TPD & Critical Illness
By Company
Plan
Plan Details
✓ Coverage for whole life
AIA Group Life &
TPD
✓ Total and permanent
disability protection
AIA Supplementary
Major Medical
AIA Group Hospital
and Surgical
CLIENT ANALYSIS
✓ Covers medical bills
on top of existing medical
insurance
✓ Covers hospitalisation bills
on top of existing medical
insurance (surgery,
emergency accident, death
etc.)
INSURANCE
RISK PROFILE + SAA
Coverage
• Death: S$251,945
assured
• TPD: S$251,945 assured
• Reimbursement
percentage: 80%
• Reimbursement
percentage: 100%
MARKET OUTLOOK
FUND SELECTION
Currently Mr.
Sugar relies
heavily on group
insurance for
coverage as he will
not be
guaranteed covera
ge if he retires
We recommend
him to
enhance individual
coverage instead
CONCLUSION
Appendix 5a: Additional Justification for Proposed Insurance
Client Income Replacement Calculator - Death
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
SUGAR
MUMMY
CONCLUSION
Appendix 5b: Additional Justification for Proposed Insurance
Client Income Replacement Calculator - TPD
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
SUGAR
MUMMY
CONCLUSION
Appendix 5c: Additional Justification for Proposed Insurance
Client Income Replacement Calculator – Critical Illness
SUGAR
MUMMY
Note: As a rule of thumb, experts recommend covering a minimum of five years, as this is roughly the amount of time the average person needs
to recuperate from a critical illness, return to work and adjust his lifestyle
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 5d: Additional Justification for Proposed Insurance
Client Income Replacement Calculator – Early Critical Illness
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
SUGAR
MUMMY
CONCLUSION
Appendix 5e: Additional Justification for Proposed Insurance
Client Income Replacement Calculator – Personal Accident
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
SUGAR
MUMMY
CONCLUSION
Market Outlook
United States, Japan, China, Singapore, India, Germany, Russia, United Kingdom, South Korea, Indonesia
SUGAR
MUMMY
Appendix 6: Summary of Market Outlook
OVERWEIGHT
CLIENT ANALYSIS
INSURANCE
NEUTRAL
RISK PROFILE + SAA
MARKET OUTLOOK
UNDERWEIGHT
FUND SELECTION
CONCLUSION
Appendix 6a: Japan
SUGAR
MUMMY
Macro Analysis
Higher Consumption with Increasing COVID-19 Vaccination Rates
Overall Outlook:
Overweight
•
Japan’s GDP growth to rebound to 2.3% in 2021 and
accelerate to 2.8% in 2022.
•
1
Japan’s vaccination rate is still increasing even after
surpassing rates in the US and Europe, with about 80% of
Japan GDP Growth
Rebound
the population receiving 1 dose and 75% receiving 2 doses
•
Forced savings of ¥34 trillion expected to be deployed as
pent-up spending, driving up consumer demand
2
Favourable Structural
Shifts to Economy
Capex Gaining Momentum due to Digital Investment
•
Manufacturers and non-manufacturers expect their production
capacity to exit “excessive capacity” territory (supply for a
product exceeds demand), from nearly 20% of all enterprises
3
in excess capacity to a forecast of nearly 0% in 2022
Temperate Central
Bank Policies
•
Digital Agency launched to encourage digitalizing publicsector, software investment to improve substantially beyond
2020
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6a: Japan
SUGAR
MUMMY
Macro Analysis
Changes in post COVID-19 consumer demand
Overall Outlook:
Overweight
•
Due to the prevalence of COVID-19 telecommuting policies in Japanese
companies, e-commerce has served as an alternative for Japanese
consumers to conveniently purchase and consume goods
•
1
Earnings at convenience stores could catch a tailwind from a recovery
in pop-in customer demand as economies reopen
Japan GDP Growth
Rebound
•
Food Inflation could lead to a higher margin in supermarkets as operators
have the control over selling prices, as well as labor and operational cost
control
2
Rise in ESG - Hybrid and Electrical Vehicle Sales in Japan
Favourable Structural
Shifts to Economy
•
9/10 of the 5 million cars purchased in Japan are from domestic firms – Toyota
plans to sell 3.5 million EVs worldwide by 2030
•
The percentage of total global sales accounted for by HVs and EVs, respectively, to
rise to 18.6% and 13.6% in 2025 and 31.5% and 22.7% in 2030
3
•
Temperate Central
Bank Policies
Subsidies for Japanese EV were raised to a maximum of ¥800,000 per vehicle, and
to a maximum of ¥500,000 per vehicle for minivehicles and PHEVs
•
The global semiconductor market will grow by 23% y-y to $542bn in 2021 and 9% to
$590bn in 2022. With sales of new gasoline cars being banned in UK and Europe
by 2035, demand for Hybrid and Electric Vehicles are expected to gain traction.
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6a: Japan
SUGAR
MUMMY
Macro Analysis
Monetary Policy – Maintain Yield Curve Control and Negative Interest Rate
Overall Outlook:
Overweight
•
Inflation will pick up only in a limited manner and remain low at
<1%
•
1
US wage-led inflation channel is unlikely to influence Japan as
businesses have engaged in “labor hoarding" where they are
Japan GDP Growth
Rebound
discouraged from laying off workers
•
Wage-setting behaviour of businesses have also led to weak
wage-led inflation in Japan as compared to other parts of
2
the world
Favourable Structural
Shifts in Economy
Fiscal Policy – Quantitative Easing Tapering
•
Fiscal
package
(7% of GDP),
3
•
Temperate Central
Bank Policies
INSURANCE
2021
was
around
¥40
trillion
with 2022 package to be smaller
In 2020, the BOJ increased JGB purchases temporarily, mainly
short-term bills, in order to support funding for the government’s
emergency packages
•
CLIENT ANALYSIS
in
RISK PROFILE + SAA
BOJ has moved to reduce such purchases in 2022
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6a: Japan
SUGAR
MUMMY
Macro Analysis
Opportunities
Overall Outlook:
Overweight
1
•
Stocks – With no hurry to normalize monetary policy,
Japan's Nikkei and TOPIX indexes are forecasted to reach
new highs in H2 2022 and in 2023, as profit margins
Japanese companies are adapting well to a slightly higher
inflationary environment
•
Bonds – With fiscal packages, domestic banks have a
widening loan-to-deposit gap of around JPY70trn (more
deposits than loans) with excess funds. These banks will
have less incentive to sell bonds to raise funds, limiting
bond supply.
•
FX – Policy makers unlikely to intervene through policy rate
hikes.
Japan GDP
Growth Rebound
2
Favourable Structural
Shifts to Economy
CLIENT ANALYSIS
INSURANCE
•
Real Estate – Similar to global trends, the pandemic may
set a new standard of WFH arrangements, putting
downward pressure on demand for office space.
•
Furthermore, demand may falter due to a drop in number of
households and a decrease in population
Conclusion
•
Stocks – To overweight stocks due to stable, non-normalizing monetary policy as well as favourable economic trends
that are structural
•
Bonds - Supply Decreases, Widening loan-to-deposit gap will help absorb supply of JGB.
Demand Increases, Negative interest rates charged on excess reserves held with banks, these
banks are trying not to hold negative rate balances, driving demand for JGB as they purchase JGB to earn a higher
investment return instead. Possible buy
•
FX – JPY/USD will remain relatively stable as BOJ will not have drastic policy rate hikes as compared to the Federal
Reserve. BOJ has maintained its 0.1% interest rate which is close to 0%
3
Temperate Central
Bank Policies
Threats
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6b: India
SUGAR
MUMMY
Macro Analysis
Monetary Policy to be less accommodative due to policy rate hike
Overall Outlook:
Underweight
• Prior outperformance can be attributed to the surplus liquidity in
the system, but the setup may not remain so conducive if 100bp
policy repo rate hike in FY23 occurs
• Suggested policy rate is around 40-50bp higher than the current
repo rate at 4.0%, with possible 100-120bp of rate hikes in 2022
• Highly likely to occur as inflation has been surging closer
towards RBI's 2.0%-6.0% inflation target, which will pressure
RBI for rate hikes
1
Surplus Liquidity is
Temporary
2
3
High Inflation Likely to Persist
High Forward P/E ratio
compared to rest of
world
• CPI inflation to be higher, at 5.6% in 2022, which makes it the
3rd year of inflation above 4%
• On the supply side – energy crunch will cause fuel inflation
through higher impact to electricity and global food prices
• Demand Side – narrowing firm profit margins will likely
pressure them to raise prices
• Twin deficits in both current account and balance of
payments (estimate USD19.5 bn deficit) will increase India's
risk of being vulnerable to capital outflows
Low Levels of Capex
and Political
Uncertainty
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6b: India
SUGAR
MUMMY
Macro Analysis
Low Expected Earnings with low Exposure to China's potential recovery
Overall Outlook:
Underweight
• With low % of exports to China as GDP
(close to only 1% as compared to Korea's
10%), India will not be well-positioned to
take advantage of China's GDP recovery
• It is currently holding a 31% price earnings
premium as compared to its 14% Cash Flow
Return on Investment Return
1
Surplus Liquidity
is Temporary
2
3
High Forward P/E ratio
as compared to rest of
world
Uncertainty over PMI decoupling and high P/B Ratio
• As compared to South Korea, India has a very
high price to book ratio (4%) for a
comparable percentage of Value Creation
• India's performance has also decoupled from
global PMI, which raises uncertainty as to its
changing relation to new orders in the
manufacturing sector
Low Levels of
Capex and
Political Uncertainty
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6b: India
SUGAR
MUMMY
Macro Analysis
Disappointing levels of CAPEX
Overall Outlook:
Underweight
•
•
1
•
Surplus
Liquidity is Temporary
2
3
High Forward P/E
ratio as compared to
rest of world
Political Uncertainty – Tax and Expenditure
• Careful spending, coupled with high tax collections in FY22 will largely
be offset by additional spending on telecom reforms and food
subsidies
• Fiscal deficit to remain 6.6% of GDP in 2023 and 6.8% of GDP in 2022.
However, debt of National Highways Authority of India may push this
deficit even higher (1.3% of GDP) should reporting standards be
updated
• High uncertainty could arise due to high unemployment figures, with
scraping of farm laws and farm loan waivers to impact the broad-based
economy
Low Levels of Capex
and Political
Uncertainty
CLIENT ANALYSIS
INSURANCE
Although the government has intentions to spend around INR111trn
between FY20-FY25, an estimate of INR74trn is a more realistic
amount
40% of the capex will have to come from the state government, and
20% must come from contributions from the private sector
On the consumption side, demand recovery has been disappointing
due to weak consumption from lower-income householders and a
lukewarm capacity utilization rate of 70%
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6b: India
SUGAR
MUMMY
Macro Analysis
Overall Outlook:
Underweight
1
Opportunities
Threats
GDP – Increase in capacity utilization rates
would push demand higher, expectations for
GDP Growth 2022 to be on track at 7.5%
Stocks - Gearing up for repo rate hikes from
1Q22 will withdraw surplus liquidity from the
system
Surplus Liquidity is
Temporary
2
3
High Forward
P/E ratio as compared
to rest of world
Low Levels of
Capex and
Political Uncertainty
CLIENT ANALYSIS
INSURANCE
Conclusion
Agriculture (15.4%), Industry (23%), and Services (61.5%) are major components of the economy.
However, political uncertainties arise as the farmer protests in India has driven up logistical costs by up to
8%-10%, due to supply chain disruptions.
•
Equity – underweight India equities as they have high valuations with a possible interest rate hike
•
Fixed Income – hawkish government during an inflationary environment would drive bond interest
rates up
•
FX – INR is expected to depreciate
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6c: China
SUGAR
MUMMY
Macro Analysis
Impressive Real GDP growth
Overall Outlook:
Overweight
•
GS and UBS agree that real GDP growth will slow down in 2022 (4.8% and
5.4% resp) compared to 7.8% in 2021, but will still outpace the rest of the world
of 4.5%
1
•
The slower growth rate can be attributed to a weakening real estate market
and low customer confidence, as sales at China's top 100 developers
Stable Growth Outlook
decreased by over 40% in January YoY amidst the deleveraging campaign
•
China's zero-Covid policy and the increased transmissibility of the Omicron
variant could lead to more disruptions that result in sluggish consumer
spending and impact supply chain recovery
2
Strong Government
Support
...but may experience high imported inflation and reduced margins
•
Elevated PPI and depressed CPI in 2021 from global supply chain issues
and energy shortage resulted in a record high PPI-CPI gap in 2021, but is
3
expected to narrow in 2022
•
Diverging Policies with
the West
However, the escalating conflict between Ukraine and Russia, coupled with
the long list of sanctions imposed by the US and European Union,
will significantly drive-up commodity prices and disrupt supply chains, which
could further increase the PPI inflation
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6c: China
SUGAR
MUMMY
Macro Analysis
By ensuring a "Proactive Fiscal Policy"
Overall Outlook:
Overweight
•
Ministry of Finance announced that tax and fee cuts for 2022 will exceed
the estimated 1 trillion yen in 2021
•
1
MoF to allow local government to issue 1.46 trillion yen of SPB for Q1 2022
to speed up local spending with a higher allocation to infrastructure spending
•
Stable Growth Outlook
Fitch Rating expects China's infrastructure fixed-asset investment (FAI) to
pick up in 2022, helping to offset a slowdown in property investment and
stabilize the economy.
By adopting a "Prudent Monetary Policy"
2
Strong Government
Support
•
Loan demand has been hit by a wave of defaults among property developers
and business disruptions related to the pandemic. PBoC has recently cut 1Y
and 5Y LPR by 10 and 5 basis points this year.
•
3
UOB and Nomura analysts predict that PBoC is likely to lower benchmark
interest rates by another 15 basis points by mid-year.
Diverging Policies with
the West
•
Credit Suisse anticipates another 50-basis point reduction in RRR by midyear, even after RRR was reduced by 100-basis points in 2021
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6c: China
SUGAR
MUMMY
Macro Analysis
US-China Monetary Policy Divergence
Overall Outlook:
Overweight
•
China CPI grew only 0.9% y-oy (slowest rate across
Asia) compared to 7.5% in US
•
1
While the US (and the rest of the world) is expected to
accelerate monetary tightening to tame inflation, China is
Stable Growth Outlook
signaling further monetary easing to counter its slowing
growth
2
Strong Government
Support
3
Diverging Policies with
the West
Monetary policy tightening will diminish foreign capital inflows into China and reduce trade surpluses due
to lower demand for Chinese products. As the disparity persists, this will put upward pressure on the U
SD/CNY exchange rate. The RMB's depreciation may aid in boosting exports.
Interest rate hikes in the United States have devastated equities throughout the world, but China's
softening monetary policy will help bolster economic development (infrastructure spending and housing
recovery), improve earnings and boost stock prices
Lower interest rates would make Chinese bond yields less attractive than that of US
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6c: China
SUGAR
MUMMY
Macro Analysis
Opportunities
Overall Outlook:
Overweight
1
Slower but Stable
Growth
2
Economic Stability &
Supporting Growth
3
Diverging Policies with
the West
CLIENT ANALYSIS
INSURANCE
Threats
•
Clean Energy - China is the leader in the clean energy
sector with strong supply and demand for renewables.
China will continue to see strong capacity growth over
the next 5 years
•
Stocks - During 2021, the large China internet stocks
declined by almost 50% from their peaks vs earnings
downgrades of 26%. Valuation is now attractive with
the sector trading at an all-time low on a P/S basis.
•
Bonds - it is easier to make a case for Chinese USD
denominated bonds to outperform their US or European
counterparts at least over the next 6-12 months, given
attractive valuations after this year’s property sectordriven sell-off
•
Property - Potentially see some defaults on property
companies or major restructuring. Offshore corporate
bonds has had record default in December 2021 and could
see more defaults this year. However, this could give rise
to
higher
quality
real
estate
property
stocks. Depreciating RMB will also increase default risks for
US offshore bonds.
•
FX - Fitch Ratings believes the Chinese yuan will weaken
in 2022 as softer external demand for Chinese products
and a diverging trend of monetary policy stances
between China and the US will support the US dollar
against the yuan.
•
The US could react with tariff hikes against China for not
complying with the Phase One Deal’s import targets
Conclusion
The predicted slowdown in GDP would be attributed to a downturn in the property industry, weaker company
profits, and less exports to the rest of the globe. However, unlike its western peers, China's approach on
boosting recovery this year through monetary policy relaxation will bring China to an overweight.
• Overweight Equity due to attractive valuations and China's recent pledge to keep Chinese capital markets
stable.
• Bond prices are projected to rise as interest rates fall. However, certain industries, such as offshore
property bonds, will pose greater business risks.
• RMB is projected to depreciate because of weaker export demand, monetary policy easing, and the
possibility of tariff rises against China.
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6d: Germany
SUGAR
MUMMY
Macro Analysis
Private Consumption will increase after easing of most COVID-19 restrictions
Overall Outlook:
Neutral
•
4th wave of pandemic that
resulted in tightening
• Deutsche Bundesbank
expects unemployment
rate to improve (5.0% in
Feb 2022) and
employee compensation
is projected to increase
of measures will
1
Growth in Private
Consumption
ease from March 2022
•
High savings ratio and low
private consumption trend in
2021 indicates pent-up
demand
2
Long term uptrend in consumer demand
Expansion of Business
Activity
• Consumer Spending in Germany is expected to be 398.30
EUR Billion by the end of this quarter.
• In the long-term, the Germany Consumer Spending is
projected to trend around 437.29 EUR Billion in 2023 and
448.23 EUR Billion in 2024
• Even though high inflation will reduce purchasing power,
Deutsche Bundesbank believes that the easing COVID
restrictions will promote demand
3
Inflationary Concerns
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6d: Germany
SUGAR
MUMMY
Macro Analysis
High PMI indicates expansion of business activity
Overall Outlook:
Neutral
• Flash Germany PMI Composite Output Index ticked up to 54.3 in January
from December's 18-month low 49.9, signaling solid growth in business
activity across the private sector
• Flash Germany Manufacturing PMI at a 5-month high of 60.5 in
January as lead times on inputs eased
• This reflects an increase in overall business confidence as supply-chain
concerns and hopes of stronger demand as the Omicron wave of COVID19 subsides
1
Growth in Private
Consumption
2
Strong demand for German exports
Expansion of Business
Activity
3
Inflationary Concerns
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
•
Germany's industrial order backlog (specifically
automotive industry) is the highest in more than 40
years
•
Manufacturing industry will be able to close the gap
between actual output and the theoretical output that
would have been possible had the bottlenecks not
occurred. This will give exports a strong boost.
FUND SELECTION
CONCLUSION
Appendix 6d: Germany
SUGAR
MUMMY
Macro Analysis
Record high energy prices to increase business costs
Overall Outlook:
Neutral
• Institute of Energy Economics reported that wholesale price for electricity
in Germany has more than tripled from 2020 to 2021 to an average of 97
euros per megawatt-hour (MWh), reaching the highest in 20 years
• Europe’s gas storage facilities at a lower-than average level at 77%
capacity compared to the usual of 90 percent due to supply chain issues
• Russia-Germany Nord Stream 2 pipeline has not received operating
permit and is used as a bargaining chip for the Russia-Ukraine conflict
1
Growth in Private
Consumption
2
Expansion of Business
Activity
• EU Commission expects energy prices to remain high and volatile until
at least 2023
Increased costs will be filtered down to consumers
•
3
•
•
Inflationary Concerns
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
Deutsche Bundesbank expects a 5% inflation in
2022 as energy prices continue to rise, well above the
government's expected 3.3% and ECB's target of 2%
Russia’s war with Ukraine will also further boost energy
prices and inflation
Deutsche Bundesbank may consider normalizing
monetary policy and increasing interest rates to
preserve price stability
FUND SELECTION
CONCLUSION
Appendix 6d: Germany
SUGAR
MUMMY
Macro Analysis
Overall Outlook:
Neutral
1
Opportunities
Threats
Bonds – As inflation remains uncomfortably high, ECB is
expected to normalize monetary policy and reduce net
asset purchases by Q4 this year. The prospective rate
hikes triggered repricing - turning negative yield bonds (of
different tenors) positive. For example, German 5-year yield
turned positive for the first time since 2018.
Equities – German DAX are highly sensitive to the
ongoing energy crisis and the Russia-Ukraine
conflict. Geopolitics will continue to dictate sentiment and
thus with no significant signs of easing tensions, volatility
will persist with headline risk remaining elevated. While
analysts predict that DAX 40 would drop to 11,111 this year,
the index is expected to rebound by 2024.
Growth in Private
Consumption
FX – ECB is expected to maintain its high QE and current
negative interest rates till Q4, diverging from most
economies which are increasing interest rates. High QE
and low interest rates would result in Euros to depreciate
against other currencies.
2
Expansion of Business
Activity
3
Inflationary Concerns
CLIENT ANALYSIS
INSURANCE
Conclusion
While private consumption and commercial activity are likely to improve, inflationary pressures are expected to
remain strong due to record high energy costs. Furthermore, the ECB's firm stance of maintaining negative
interest rates until the fourth quarter of this year would put extra pressure on inflation this year, which increases
the risk of an inflationary spiral. Because of such uncertainties, Germany's overall outlook is neutral.
•
•
•
Equity: To underweight equity because of the inherent risks in the short-term
Bonds: Yields are expected to increase as monetary policies normalizes at the end of the year
Euro is expected to depreciate due to high inflation and diverging monetary policy
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6e: United States
SUGAR
MUMMY
Macro Analysis
The Fed is doubling the pace at which it’s tapering its QE purchases
Overall Outlook:
Underweight
•
The Federal Reserve responded to stubborn inflation
pressures in the US economy by rapid purchase reductions
1
wrapping up in March 2022
Accelerated Tapering
by the Fed
•
Since Monetary Policies often come with a lag, the Fed
has decided to raise rates earlier due to worries of
persistent inflation into the second half of 2022
2
Easing of Inflationary
Pressures
•
The Fed is expected to raise rates for the first
time in March 2022, following with hikes in June
3
and September before pausing in late 2022
Slower GDP Growth
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6e: United States
SUGAR
MUMMY
Macro Analysis
The Fed’s anti-inflammatory policy
Overall Outlook:
Underweight
•
The U.S. Central Bank will begin a series of
interest rate hikes in March to kick of a tightening
of monetary policy
1
•
Accelerated Tapering
by the Fed
This policy aims to slow down the economy and
reduce consumer spending to bring inflation
under control
Improvements in jammed up supply chains
2
•
Easing of Inflationary
Pressures
Core CPI Inflation is expected to end 2022 at around 3.4% y-oy, down from 7.5% in January 2022
•
In addition, used vehicle prices, which have been the single
largest contributor to the acceleration in core inflation, are
3
poised to slow in the beginning of 2022 based on wholesale
Slower GDP Growth
prices and the recovery in US auto production
•
Auto dealer inventory build-up will also likely reverse price
increases
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6e: United States
SUGAR
MUMMY
Macro Analysis
Expectations for Stalled Fiscal Policy in 2022
Overall Outlook:
Underweight
1
Accelerated Tapering
by the Fed
%
Real GDP
Personal consumption
Nonresidential fixed invest
Residential fixed invest
Government expenditure
Exports
Imports
Contributions to GDP:
Final sales
Net trade
Inventories
2021
5.6
8.0
7.6
9.0
0.7
3.8
13.4
2022
4.6
4.9
7.0
-3.1
-1.8
5.0
7.0
2023
1.9
2.4
4.2
0.7
-1.3
6.7
3.7
•
Economic growth will likely remain robust in 2022 but will expand at a slower
5.8
-1.4
-0.2
3.3
-0.5
1.3
2.3
0.3
-0.3
•
Fiscal support is likely to quickly turn to fiscal drag in 2022
•
Infrastructure spending to add roughly 0.4pp to real GDP growth in 2022
pace relative to 2021
•
Real GDP growth will likely moderate to 4.6% y-o-y in 2022, down
somewhat from 5.6% y-o-y in 2021
but expiring COVID support will subtract roughly 2.6pp from real GDP
growth
2
Easing of Inflationary
Pressures
•
Although a tighter monetary policy is likely to reduce consumer spending,
consumer spending is still likely to remain robust due to excess savings
accumulated from the lockdown
3
•
This will likely help offset fiscal drag as pandemic support wanes (expiration
of enhanced unemployment benefits and distribution of stimulus payments)
Slower GDP Growth
•
In addition, higher stock prices, along with rapid home price growth, will
likely support consumer spending
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6e: United States
SUGAR
MUMMY
Macro Analysis
Overall Outlook:
Underweight
1
Opportunities
Threats
FX – Analysts at ING bank see the US dollar index
rising to 100.00. A combination of elevated upside
volatility in energy prices, equity underperformance
and liquidity concerns continue to push investors
seeking safety towards the US dollar.
Equity – Russia’s war in Ukraine has created a
gigantic new source of worry for investors, but the
factors behind the selloff go beyond just the war.
They include concerns about higher inflation,
impending interest rate hikes and the slowing pace
of economic growth. The S&P 500 plummeted
nearly 12% year-to-date by late February
Accelerated Tapering
by the Fed
2
Easing of Inflationary
Pressures
3
Slower GDP Growth
CLIENT ANALYSIS
INSURANCE
Conclusion
The predicted slowdown in GDP growth would be attributed to the tightening monetary policy causing
rising interest rates, waning fiscal support and reduced consumer spending. Therefore, as inflation
continues to persist throughout 2022 and GDP is rising at a slower rate than the inflation is rising, it leads
us to a conclusion of U.S. having an overall market outlook of underweight.
•
Equity – to underweight equity because of the inherent risks in the short term
•
Fixed Income – the raising of interest rates in 2022 will potentially raise bond yields and eventually
lower bond prices
•
FX – USD is expected to appreciate due the hawkish fed raising interest rates and it being a safehaven for investors
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6f: United Kingdom
SUGAR
MUMMY
Macro Analysis
The Office of Gas and Electricity Markets (OFGEM) Raising the Energy Price Cap
Overall Outlook:
Neutral
•
•
1
•
Persistent Inflation
•
2
GDP Growth Rate to
Slow Down
Tight Labor Market Causing a Rise in Wage Growth
•
•
3
Cheaper Relative to
Global Markets
CLIENT ANALYSIS
INSURANCE
UK inflation is forecasted to peak at 4.6% in April 2022
The UK is a net importer of gas – importing approximately 60% of
its natural gas needs, and has very little gas storage capacity, making
it more vulnerable to supply interruptions
OFGEM has announced a rise in the domestic price of gas of 54%
in April and is likely to rise again towards the end of 2022
The lack of additional Russian supplies due to recent tensions
between Russia and NATO and delay of the Nord Stream 2 pipeline
(bringing gas to Europe from Russia) will continue to keep gas prices
elevated
•
RISK PROFILE + SAA
Employers have been struggling to recruit staff after worker
participation collapsed in the pandemic, causing severe shortages
Employers are forced to increase workers salary to retain and attract
employees. This in turn feeds through to rising inflation if companies
raise their prices in order to accommodate higher wage bills
Although reabsorption of furlough employees have been fast and
unemployment rate has fallen to pre-Covid levels, job vacancies are
at a record high and businesses are still struggling to hire and pay
their employees
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6f: United Kingdom
SUGAR
MUMMY
Macro Analysis
Household consumption
Overall Outlook:
Neutral
•
•
•
1
Persistent Inflation
•
GDP growth is forecasted to slow down to 4.6% in 2022
Household disposable income adjusted for inflation is expected to
shrink in 2022
Intensifying pressure on household budgets, together with rising energy
prices, will weigh down on consumer spending developments and act
as a handbrake on the pace of GDP growth
A greater share of savings accumulated during the lockdowns could be
required to finance spending on essential goods as opposed to consumer
durables and hospitality services
2
Rapid Tightening of Fiscal Policy
GDP Growth Rate to
Slow Down
•
•
3
•
Cheaper Relative to
Global Markets
CLIENT ANALYSIS
INSURANCE
•
RISK PROFILE + SAA
UK fiscal policy seems to be tighter than elsewhere
The Government is now in the mode of reducing discretionary
spending wherever possible, suggesting that fiscal policy is set to
become a drag on the economy
This fall in the deficit includes the withdrawal of emergency measures
only appropriate during lockdown (e.g. the end of the furlough scheme)
However, discretionary tax rises are being applied at their fastest rate
since the 1970s
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6f: United Kingdom
SUGAR
MUMMY
Macro Analysis
UK Sectors are Abnormally Cheap Compared to Global Peers
Overall Outlook:
Neutral
•
•
1
Persistent Inflation
2
GDP Growth Rate to
Slow Down
•
The UK tends to Outperform when Commodity Prices Rise
•
•
3
Cheaper Relative to
Global Market
CLIENT ANALYSIS
INSURANCE
From Figure 234, we can see that nearly all the major sectors in
the UK trade on an abnormal P/E discount to their normal
discount (the main exception being pharma)
Since voting to leave the EU in 2016, UK stock market returns
have lagged behind international peers and a historically wide
valuation discount has become ingrained
So much so that the UK has become a hunting ground for
foreign buyers searching for cheap deals, such as the US
buyers of supermarket chain Morrisons and of defence
manufacturer Meggitt
•
RISK PROFILE + SAA
The UK has one of the largest energy and materials market
capital weightings
As such, we can see that UK tends to outperform when
commodities prices rise (Figure 241)
UK being a value market, higher fossil fuel prices tend to reveal
themselves in higher inflation expectations or bond yields
which in turn helps value
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6f: United Kingdom
SUGAR
MUMMY
Macro Analysis
Overall Outlook:
Neutral
1
Opportunities
Threats
Equities – UK equities remain significantly
undervalued compared to global markets and
reasonably valued in absolute terms. The removal
of Brexit uncertainty and the country’s swift
vaccination rollout have contributed to the
improved outlook
FX – Sterling crashed against a surging dollar as
investors rushed into safe-haven assets after
Russian forces invaded Ukraine. Safe-haven
currencies such as the yen and U.S. dollar were in
demand, while riskier currencies, including sterling,
dived
Persistent Inflation
2
GDP Growth Rate to
Slow Down
3
Cheaper Relative to
Global Market
CLIENT ANALYSIS
INSURANCE
Conclusion
The rising gas and energy prices in the UK is likely to bring inflation to a peak in 2022. This rise in
inflation will weigh down on consumer spending and will act as a handbrake for GDP growth. Despite
rising wage growth in the UK, household disposable income adjusted for inflation will shrink. However,
UK’s undervalued equities will bring our overall outlook for UK to neutral.
•
Equity – overweight UK equities as they have widely outperformed global equities
•
Fixed Income – Bank of England is expected to hike rates, thus will potentially raise bond yields and
eventually lower bond prices
•
FX – Sterling is expected to depreciate against the USD
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6g: Singapore
SUGAR
MUMMY
Macro Analysis
High vaccination rate
Overall Outlook:
Overweight
•
Singapore has 91.9% of the population being fully vaccinated from
Covid-19, one of the highest vaccination rate in the world
1
Positive Demographic
Trend
•
The vaccination rate is expected to reach 95% by the end of 2022
•
High vaccination rates should enable a catch-up in consumption
Extended Vaccinated Travel Lane (VTL) with Indonesia, India and Malaysia
•
Singapore recently added Indonesia and India – its second and
third largest sources of tourists in 2019 – to the VTL
2
•
Strong Economic
Recovery
Reopened the Johor-Singapore Causeway and started a VTL
between both countries
•
The beneficiaries of the border reopening are the travel and related
sectors (i.e., retail trade, transport and storage, accommodation and
3
food services, and transport engineering), which accounted for
Central Bank Policies
11.3% of GDP in 2019
•
Singapore’s TRIPTracker score is expected to reach 50% by
September 2022 before rising further to 95.8% by end-2022
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6g: Singapore
SUGAR
MUMMY
Macro Analysis
GDP growth
Overall Outlook:
Overweight
•
Singapore is expected to remain on a strong recovery path
driven by still-robust private consumption growth
1
Positive Demographic
Trend
•
Laggard sectors such as tourism and construction catch up fast
•
GDP growth forecast for 2022 is at 4.7%, above consensus’ 4.2%
and the pre-pandemic average of 3.9%
2
Upward pressure on core inflation
Strong Economic
Recovery
•
Core inflation to rise sharply from 0.9% in 2021 to 1.7% y-o-y in
2022
•
3
This is above the historical average of 1.5%, due to the strong
GDP growth rebound in 2022
Central Bank Policies
•
Some factors include higher demand-pull inflation pressures,
higher transportation cost inflation on rising car prices, and
increase in accommodation cost inflation on higher property prices
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6g: Singapore
SUGAR
MUMMY
Macro Analysis
FX policy normalization
Overall Outlook:
Overweight
•
FX policy normalization began in October 2021 and the abovetrend growth projections further support Nomura’s FX strategy
team’s view that the Monetary Authority of Singapore (MAS) will
1
tighten FX policy further at its next policy announcement in 2022
Positive Demographic
Trend
•
MAS ‘is ready to act’ against accelerating inflation
•
Expects MAS to include a further slope increase (Nomura
assign a 60% likelihood) by 1.0% (to a 1.5% annual appreciation
2
slope)
Strong Economic
Recovery
•
MAS may also become more hawkish and re-center the midpoint higher (to which Nomura assign a 20% likelihood), and
possibly increase the slope further
3
Fiscal policy
Central Bank Policies
•
Forecast for the fiscal deficit to narrow further to a small 0.5% of GDP in FY22 (year ending March
2023) from 2.2% in FY21, consistent with a less need for support measures
•
CLIENT ANALYSIS
INSURANCE
Do not expect the government to implement a GST tax hike in 2022 (~15% of operating revenues)
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6g: Singapore
SUGAR
MUMMY
Macro Analysis
Overall Outlook:
Overweight
1
Positive Demographic
Trend
Opportunities
Threats
Stocks – stepped hike in GST from 7% to 8% in 2023 and 9% in 2024
may catalyse consumer spending in the short term, benefitting
companies selling big ticket items such as motor vehicles and
watches. Real estate investment trusts (Reits) with retail exposure
also stand to gain
Real Estate – pent-up demand is strong owing to the
buoyancy in the property market, with residential property
prices rising a year-to-date 7.1% in 2021 versus 1.6% in
2020. Property tax rates will also be raised from 4-16% to
6-32% of estimated rent for owner-occupied homes, and
from 10-20% to 12-36% for non-owner-occupied homes
Fixed income – DBS announced that it has priced US$1.5 billion
worth of fixed rate covered bonds due 2027, issued under the bank’s
US$10 billion global covered-bond programme, and are expected to
be rated AAA by Fitch Ratings and Aaa by Moody’s Investors Services
FX – Long S$NEER as next policy MAS move will likely result in
further slope increase, attractive risk-reward and SGD will also be
supported by Singapore’s strong overall BoP surplus
2
Strong Economic
Recovery
Conclusion
Stocks – hike in GST would increase consumer spending in the short term especially for big ticket purchases
Fixed Income – DBS announced that it has priced US$1.5 billion worth of fixed rate covered bonds due 2027
FX – Long S$NEER due to further slope increase supported by strong overall BoP surplus
3
Central Bank Policies
Real Estate – strong pent-up demand drive prices up, alongside the increase in property tax rates which weighs on
the wealthy
Overall, high vaccination rate boosts consumption, where expected GDP is high, placing an upward pressure on core
inflation. As such, MAS is ready to tackle the accelerating inflation by becoming more hawkish. Therefore, Singapore’s
outlook is overweight.
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6h: South Korea
SUGAR
MUMMY
Macro Analysis
2022F KOSPI market outlook
Overall Outlook:
Neutral
1
Bullish On KOSPI
Earnings
2
Declining Balance Of
Trade
3
Early Ending To The
Hiking Cycle
CLIENT ANALYSIS
INSURANCE
•
Nomura estimate 2021 KOSPI earnings grew 105% y-y, and forecast earnings will further grow 15% y-y in 2022F,
with KOSPI rising to 3500 in 2022F
•
Memory sector earnings (which comprise 34% of total earnings) will likely grow 32% y-y
•
Tech/auto sector earnings will also likely grow 50%/12% y-y in 2022F
•
One of the main earnings growth drivers for 2022F will be replenishing channel inventory, which has been lowered
from production disruptions in 2021
•
These sectors should recover once the chip shortage eases
•
Share prices are undervalued due to excessive concerns despite solid earnings growth outlooks
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6h: South Korea
SUGAR
MUMMY
Macro Analysis
Slowing export growth
Overall Outlook:
Neutral
•
Chip prices have started falling because of slowing demand for tech products (like PCs)
and global supply chain issues, which have constrained tech product production
•
1
Global chip shipments to rise over 20% y-o-y in 2021 and then moderate to under -10%
in 2022
Bullish On KOSPI
Earnings
•
Overall, chip exports are likely to moderate next year with a sharper slowdown likely in
H2 2022, with tighter global financial conditions and higher police uncertainty adding
to downside risks
•
2
Economic growth to decline sharply to around its potential growth rate of 2%, led by a
downshift in export growth
Declining Balance Of
Trade
Growing downside risks from the weakening of China’s real estate market
•
Chinese government has tightened liquidity conditions due to the weakening of real
estate market (makes up 29% of China’s GDP), which is believed to affect Korea’s
3
export growth with a lag
Early Ending To The
Hiking Cycle
•
Since chip exports to China account for ~62% of total chip exports, a slowdown in the
Chinese economy could hurt Korea’s exports
•
Overall, we expect global goods demand (e.g., PCs and tech gadgets) to slow down
after the strong and rapid recovery during the lockdown periods
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6h: South Korea
SUGAR
MUMMY
Macro Analysis
Inflection point in Q2
Overall Outlook:
Neutral
• Our view on economic growth and inflation suggest that there will be growing headwinds towards the Bank Of Korea’s
(BOK) hawkish stance
• With slowing growth and stabilizing inflation, we expect the BOK to deliver a final hike at its January meeting, which
1
would raise the policy rate to its pre-pandemic level of 1.25% from a historical low of 0.5%
Bullish On KOSPI
Earnings
• Expect a big shift in the growth outlook around Q2 2022 due to a sharp moderation in export growth
• This will likely lead the BOK to downwardly revise its economic outlook at the May meeting
• If the BOK starts to cut its growth forecasts, its reaction function will rapidly take into account a shift to growth concerns
from price and financial stability currently, which will lead to it reassessing its monetary policy strategy
2
Declining Balance Of
Trade
Presidential election
• If the January hike materializes, we would expect the BOK to take a prolonged pause due to the leadership changes
within the BOK
• Yoon Seok-youl (People Power Party) has won the presidential election against Lee Jae-myung (Democratic Party)
3
Early Ending To The
Hiking Cycle
• Yoon will reassess the hawkish stance as the opposition party is against using interest rate policy to curb housing
markets
• Yoon will likely push against using interest rates to rein in the housing markets, and put more weight on growth
• New governments also tend to implement more aggressive fiscal stimulus measures to support near-term growth
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6h: South Korea
SUGAR
MUMMY
Macro Analysis
Opportunities
Overall Outlook:
Neutral
Threats
Stocks – memory (Samsung Electronics), battery
(SDI), auto (Kia), internet (Naver), healthcare
(Samsung Biologics), consumer (Shinsegae), cyclical
commodities (POSCO)
1
Stock – cautious view on cosmetics and online
shopping where competition is further intensifying
FX – Korea’s won slumped to its lowest in nearly a
year as global funds dumped record amounts of
semiconductor stocks
Bullish On KOSPI
Earnings
2
Declining Balance Of
Trade
3
Conclusion
Overall, Nomura is bullish on KOSPI earnings where memory, tech and auto sectors are expected to do well due to the
ease in chip shortages. However, demand for such goods may decrease due to global supply chain issues and financial
conditions, resulting in a downshift in export and economic growth. This leads to the reassessment of the BOK’s hawkish
stance. With the new president in place, there would be an early end to the hiking cycle with more aggressive fiscal
stimulus measures put in place to support growth. Therefore, Korea’s outlook is neutral.
Early Ending To The
Hiking Cycle
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6i: Indonesia
SUGAR
MUMMY
Macro Analysis
Vaccination Ramp-up and Reopening
Overall Outlook:
Overweight
•
In 2021, commodity exports had led the growth recovery, but this will likely
broaden out to domestic demand going forward
1
•
Rebound in GDP
Growth
According to Nomura and Morgan Stanley, it is estimated that Indonesia
would be able to vaccinate ~85% of its population by the end 2022
…… Are Expected to be Tailwinds to Domestic Demand
2
•
Stabilising Economy
BAML 2022 GDP growth forecast stands at ~5%, well above the below-trend
3.2% in 2021 and -2.1% in 2020
•
Foresee a strong growth of 6% in private consumption (vs. 2.1% in 2021),
with consumption picking up pace in the latter half of 2022
•
3
Investment growth expected to rise to slightly above 6% (vs. 3.4% in 2021,
with growing investments in the base metal industry in response to global
Central Bank Policies
demand for EV and batteries
•
Yet to see the impacts from Omnibus Law and the Sovereign Wealth Fund,
INA, which would pose upside to investments
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6i: Indonesia
SUGAR
MUMMY
Macro Analysis
Upward Pressure on Headline Inflation
Overall Outlook:
Overweight
•
BAML forecasts that headline CPI inflation is expected to rise to ~2.8%, Y-O-Y
in 2022, up from a below-target of 1.5% in 2021
•
1
This forecast reflects the increase in demand-driven price pressures, and the
1% VAT hike planned in April 2022
Rebound in GDP
Growth
•
Inflation average is expected to be within BI’s 2-4% target range, with inflation
averaging 2% in 1H22, but jumping to near-4% in 4Q22; due to base effects
and expectations for a more sustained private demand recovery from mid-2022
2
Widening Current Account Deficit as Imports Pick Up in 2022
Stabilising Economy
• Current Account Deficit (CAD) is forecasted to gradually widen towards 1.5%
- 2% of GDP by end-2022, as we expect imports to start picking up in 2H’22
3
• However, we expect CAD to be well-below the 3 – 4% levels that brought
concerns of overheating and FX weakness in 2013 and 2018
Central Bank Policies
• Therefore, the risk of the Rupiah depreciating substantially is limited at this
juncture
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6i: Indonesia
SUGAR
MUMMY
Macro Analysis
Fiscal Policy - Modest Fiscal Consolidation
Overall Outlook:
Overweight
• Narrowing of fiscal deficit to 4.6% of GDP is expected in 2022, a drop from 5.5%
in 2021, partly reflecting additional tax revenues (VAT hike in April 2022)
• However, government underspending is expected to persist in 2022, and
1
Nomura forecasts fiscal expenditure growth of just 1.8% YoY (vs. govt. target of
Rebound in GDP
Growth
3.8%); partly due to a lower PEN budget of 1.9% of GDP in 2022 (vs. 4.5% in
2021)
• Hence, concerns over insufficient fiscal support to bolster recovery still remains
2
Tightening Monetary Policy
Stabilising Economy
• Bank Indonesia (BI) to maintain its policy rate at 3.5% in 1H’22, with modest
policy rate hikes of 25bp or 50bp in 2H’22 as the growth recovery unfolds further
• Reserve Requirement Ratio (RRR) to increase by 300 basis points from March
3
2022 onwards
• Tighter monetary policy is also a result of hawkish policy in the US as the rupiah
Central Bank Policies
CLIENT ANALYSIS
INSURANCE
is sensitive to the stronger US dollar
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6i: Indonesia
SUGAR
MUMMY
Macro Analysis
Overall Outlook:
Overweight
1
Rebound in GDP
Growth
2
Structural Shifts in
Economy
Opportunities
Threats
Stocks: Stocks are undervalued, with forward P/E valuations
of 16.1 (vs. global 20.78). Hence, remain positive on equities
for 2022, with upside on the JCI Index mainly coming from
economic growth, Omnibus Law, and the sovereign wealth
fund, INA’s developments. Stocks are undervalued
Rising Energy Prices: Oil is of high importance to
Indonesia’s energy supply. With rising prices, Indonesia
would have to import oil at higher prices than it would have
expected – thus creating complications for Indonesia’s
policy of energy subsidies
Fixed Income: Neutral outlook for 2022, with preferences for
mid-to-short tenor series due to stronger demand from local
investors. Though there are pressures from inflation and
monetary tightening, low foreign ownership and high real
yield would help limit downside to the bond market
FX: With Current Account Deficit (CAD) estimated to slightly
widen in 2022, Rupiah is expected to remain manageable
and float close to current level. Risk of a substantial Rupiah
depreciation due to portfolio flows is also limited, given the
low foreign ownership in IndoGB
Conclusion
Although Inflation and Current Account Deficit (CAD) are expected to rise, both are still expected to be within manageable
levels. This, coupled together with the rebound of GDP growth attributed to the increasing number of vaccinations and
steep decline in COVID-19 cases, we overweight Indonesia as the prospects of growth recovery look bright
3
Central Bank Policies
Equity: To overweight stocks, due to potential for strong post-pandemic economic rebound
Fixed Income: Mid-to-short tenor series bonds preferred due to weak foreign demand
FX: Rupiah is expected to float close to current levels
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6j: Russia
SUGAR
MUMMY
Macro Analysis
GDP Expected to Shrink as Sanctions Slam its Economy
Overall Outlook:
Underweight
• In light of the Russian – Ukraine Conflict, Russia is currently facing
deepening isolation and economic turmoil
• Sanctions on its economy are on the rise, and Russia has essentially been
1
cut off from Western markets as companies and investors increasingly
Contraction of
Economy
shun doing business in the country
• As a result, JPMorgan had cut its 2022 forecast from 2.4% growth to a 7%
decline, suggesting that Russia is headed for a deep recession
Russian Currency Plummets Amidst Ukraine War Sanctions
2
Tightening Monetary
Policy
• As of Feb 28, the Russian ruble has plummeted as much as 40%
against the dollar, standing at 104 Russian rubles per USD
3
• YTD, it has plummeted even further, now at 117 Russian rubles per
USD
Further Impacts of the
Russian - Ukraine
Conflict
CLIENT ANALYSIS
INSURANCE
• This currency weakness is expected to persist if the economy remains
closed off from the rest of the world
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6j: Russia
SUGAR
MUMMY
Macro Analysis
Inflation Hit a 6-Year High in February 2022
Overall Outlook:
Underweight
•
Following a strong economic rebound in 2021, inflation was initially forecasted
to slowdown from 1Q22
•
1
However, following the Russia – Ukraine conflict and a weaker ruble, CPI
further rose to 8.73% in January 2022, despite several months of interest rate
hikes previously
Contraction of
Economy
•
Annual inflation expected to peak in March/April, and then gradually decline
under the influence of the expected drop in global inflation
•
2
Inflation estimated to drop to around 5.2% - 5.7% by the end of 2022
Emergency Hike in Interest Rate To Offset Depreciation and Inflation
Tightening Monetary
Policy
• Initially, the monetary tightening cycle was expected to have peaked in late
2021, with rate cuts starting in H2’2022
3
• However, with a falling ruble and rising inflation, Russia’s Central Bank more
than doubled the country’s key interest rate from 9.5% to 20% on February 28,
Further Impacts of the
Russian - Ukraine
Conflict
CLIENT ANALYSIS
INSURANCE
further adding on to an already tightened monetary policy
• This emergency was made in an attempt to support financial and price stability
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6j: Russia
SUGAR
MUMMY
Macro Analysis
Russian Stocks Plunge after Invasion of Ukraine
Overall Outlook:
Underweight
•
The day Russia attacked Ukraine, the MOEX Stock Market plunged by
around 45%, losing $259 billion in market value
•
1
Shares in oil and gas plummeted, with Gazprom (gas) down 37%,
Lukoil (oil) and Novatek (gas) declining 34% and 20% respectively
Contraction of
Economy
•
Russia’s stock exchange was shut down on February 25, in an attempt
to stem sharp price declines driven by tough sanctions
2
Russian Bond Default is Imminent
Tightening Monetary
Policy
•
On 9th March, Fitch Ratings downgraded its rating of Russian
government bonds to junk status
3
•
This is in light of recent sanctions on Russian oil and gas exports,
which may have closed off major revenue streams for Russia and
Other Impacts of the
Russian - Ukraine
Conflict
strained its cash flow
•
According to Morgan Stanley, Russian default is expected to come
as early as April 2002
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 6j: Russia
SUGAR
MUMMY
Macro Analysis
Opportunities
Overall Outlook:
Underweight
-
1
Contraction of
Economy
2
Other Impacts of the
Russian - Ukraine
Conflict
CLIENT ANALYSIS
Rising Sanctions: Sanctions on Russia are likely
to have lasting impacts on the economy in the
coming years
Russian Default: With Fitch Ratings downgrading
Russian Bonds, likelihood of default by Russia is
very high
Conclusion
Tightening of
Monetary Policy
3
Threats
INSURANCE
While trading in Russia has been halted YTD, shares of Russian companies listed in international markets have
plunged. Companies in Russia are likely to face a major hit as the economy reels from the effects of the war with
Ukraine, including sanctions, the pullout of Western investors, increasing isolation from the rest of the world,
disruptions to supply chains and difficulty importing critical parts and materials. As such, it is forecasted that
Russia is heading into a deep recession this year, hence resulting in an overall outlook of underweight.
•
•
•
Equity: To underweight equity because of the inherent risks in light of the crisis
Bonds: Bonds have been downgraded to ‘C’, suggesting bond default by Russia is imminent
Ruble is expected to depreciate, since the economy remains isolated from the rest of the world, and
because of rising inflation
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Selection of Equity Market
Japan, China, Singapore, Indonesia
Appendix 7: Upside Potential in Japanese Automobile Sector
Equities
Higher Crude Oil Prices in Resource-Exporting
Countries
Tailwinds due to supply shortages
•
•
The seven Japanese automakers to perform
very well in 23/3 and forecast their aggregate
23/3 operating profits up 38% y-y at ¥6.4trn,
21% higher than the record high reached in
16/3.
Pent-up demand (that has built up as a
result of the supply shortages in 2021) and
restocking by dealers, particularly in the US,
to lead to substantial growth in shipments
CLIENT ANALYSIS
INSURANCE
SUGAR
MUMMY
… Which Is Supported By Global Demand For
Semiconductors
•
Raw materials such as neon gas used to make semi-conductor
chips that are used by automobiles that are imported mainly
from Ukraine and Russia will become more costly, resulting in
potential delays in production and supply chain issues.
•
Global semiconductor market will grow by 23% y-y to $542bn
in 2021 and 9% to $590bn in 2022. Main drivers of demand to be
the automobile and computing industries. Growth in Japan
market size in 2022 estimated to be 19.5% and 9.3%
respectively, to $45.4 billion
•
However, as a cyclical stock, this will be offset by potential
higher crude oil prices, which will benefit resource-exporting
countries such as Australia and the Middle East due to an
increase in economic sentiment in that area. Automobile sales
in the Middle East peaked at 1.47mn units in total in 2015,
because crude oil prices had been at the $100/bbl level
through 2014.
•
Ban of gasoline cars in UK and Europe to further increase
demand for EVs, The power semiconductors used in the main
inverter are likely to higher in demand.
•
TSMC and SSS to build a new plant in Southern Japan, with
CAPEX on this project to be $7 billion, in line with
government's establish a new fund of $5.5 billion to build new
semiconductor fabrication plants
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 8: Upside Potential in Japanese Semiconductor Sector
Equities
Growing Demand for Semiconductor Protection Equipment
SUGAR
MUMMY
..which is supported by global demand for semiconductors
• Growing interest in the MetaVerse - We expect further advances in
XR technology to be driven by pressure to provide a more
immersive experience in the metaverse and enhance the sense
of reality for activities taking place in virtual spaces, and going
forward this will require massive volumes of sensors and
actuators as well as more advanced devices. Most likely to
benefit SPE sector companies Disco and Tokyo Seimitsu.
• EUVL (Extreme ultraviolet lithography) system shipment volume
for mass production applications has been growing since 2017.
Japanese SPE and semiconductor material companies have
close to 100% of the global markets for resists, mask blanks,
and blank inspection systems.
• Global semiconductor market will grow by 23% y-y to $542bn in
2021
and 9% to $590bn in 2022. main drivers of demand to be the
automobile, computing, and telecoms industries.
CLIENT ANALYSIS
MARKET OUTLOOK
INSURANCE
RISK PROFILE + SAA
• Ban of gasoline cars in UK and Europe to further increase demand
for EVs, The power semiconductors used in the main inverter are
likely to higher in demand.
• Margins in IT businesses have been rising steadily, with the
operating margin in Hitachi's IT segment reaching 13% and
prospects of a margin of over 8% in Fujitsu's technology solutions
segment too
FUND SELECTION
CONCLUSION
Funds Selection
General Filtering Process
Appendix 9: General Flow for Fund Selection
SUGAR
MUMMY
Ensuring that the fund can executable immediately in Singapore with relevant filters
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Funds Selection
Equity
Appendix 10: Equity Fund Selection Considerations and Limitations
SUGAR
MUMMY
Selected the top 3 funds based on our considerations
Considered SGD-Hedged Equity Funds
Few Japan Financial Funds (SGD-H)
•
We identified the only 3 SGD hedged Japan
Consider Japan Equity Funds
Equity Fund that also has a higher weightage on
•
When analysing the remaining 3 funds, we used the
financials. Although Lionglobal has a lower
Japan equity fund as a benchmark for category
weightage on financials than the index, it is already
average.
the most suitable we can find.
Other potential Japan Equity Funds
•
We identified the other SGD hedged Japan
Equity Funds. However, they have an overweight
Continue with our 3 selected Japan
Equity Funds
on REITs or are focused towards small and mid-cap
Japanese companies only.
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 11: Equity Fund Structure
SUGAR
MUMMY
Only Nikko AM pays dividend
EASTSPRING INVESTMENTS –
JAPAN DYNAMIC FUND AS SGD-H
LIONGLOBAL JAPAN GROWTH
FUND SGD-H
NIKKO AM JAPAN DIVIDEND
EQUITY SGD-H
Fund Size
JPY 152,125.60M
JPY 26,224.88M
JPY 16,834.99M
Initial Investment
SGD 100
SGD 100
SGD 100
Monthly Dividend
✖
✖
✓
Dividend Yield
-
-
4.99%
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 12: Quantitative Analysis: Historical Prices
SUGAR
MUMMY
Overview of past returns of the 3 chosen funds
3Y Historical Performance
Analysis
CLIENT ANALYSIS
•
Fund movements are highly correlated as underlying fund structure is similar
•
LionGlobal is consistently priced the highest
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Funds Selection
Fixed Income
Appendix 13: Fixed Income Fund Selection Considerations and Limitations
SUGAR
MUMMY
Selected the top 3 funds based on our considerations
Considered SGD-Hedged Bond Funds
1
Few China HY Bond Funds (SGD-H)
Consider Asian HY Bond Funds
•
•
Fidelity Asian High Yield is the only SGD hedged
We broadened our search to Asian HY Bond Funds
China HY Bond Fund that also has a high weight on
and handpicked funds with a greater emphasis on
property
China and real estate.
2
No China Onshore Funds (SGD-H)
Consider Offshore Funds
•
•
No SGD-Hedged funds with a high exposure to
onshore bonds that is available for purchase in
Singapore
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
We broadened our search to offshore Asian/China
HY Bond Funds
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 14: Fixed Income Fund Structure
SUGAR
MUMMY
Only Fidelity and Allianz pays dividend
FIDELITY FUNDS – CHINA HIGH
YIELD FUND A-MINCOME(G)SGD(hedged)
ALLIANZ DYNAMIC ASIAN HIGH YI
ELD BOND CL AMG DIS H2-SGD
BLACKROCK ASIAN HIGH YIELD B
OND A2 SGD-H
Fund Size
USD 1,561.00M
USD 919.74M
USD 3,158.50M
Initial Investment
SGD 1,000
SGD 100
SGD 100
Monthly Dividend
✓
✓
✖
Dividend Yield
9.88%
11.08%
-
FIDELITY FUNDS – CHINA HIGH YIELD
ALLIANZ DYNAMIC ASIAN HIGH YIELD
Pays dividend
Pays dividend
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION
Appendix 15: Quantitative Analysis: Historical Prices
SUGAR
MUMMY
Overview of past returns of the 3 chosen funds
3Y Historical Performance
•
Fund movements are highly correlated as underlying fund structure is similar – Asian
funds with relatively higher weights on China and property sector
•
Blackrock is the newest fund and is consistently priced the highest
Analysis
CLIENT ANALYSIS
INSURANCE
RISK PROFILE + SAA
MARKET OUTLOOK
FUND SELECTION
CONCLUSION