Equities still the top choice among fund managers: Poll

A poll of 16 Singapore-based fund managers has shown that equities are still the preferred investment class at a time of global economic uncertainty.

The bi-annual Fund Poll, conducted by OCBC Bank's wealth management unit, found that eight of those polled believe that equities would offer them the highest returns in the second half of the year.

Of the eight who are keen on equities, three prefer equities in Asia excluding Japan, while the remaining five chose equities in general.

Fund managers are most positive about equity markets in Asia ex-Japan, followed by emerging markets and the US.

In Asia, China is the favourite followed by Thailand, Singapore and Hong Kong.

Among those who would not choose equities, three would go for US high-yield bonds, one would opt for gold, and the remaining four chose other asset classes.

Though almost half of the fund managers were more negative about the outlook for equity markets compared to six months ago, they felt that equities looked cheap relative to their historical valuations, and following the sell-offs in April and May.

HSBC Global Asset Management said that dividend yields were also more attractive than yields for the 10-year Treasury bond, and equities may be volatile in the near term.

Schroder Investment Management suggested that investors diversify their portfolios and focus on yield.

Eastspring Investments favours both US high-yield bonds and Asian high-dividend equities, or US high investment-grade bonds instead of high-yield bonds for those with a lower risk appetite.

The poll, which was conducted in June, found that eurozone worries continued to weigh on fund managers' minds.

Seven out of the 16 expect the eurozone crisis to deteriorate.

But most - 13 - said that they do not foresee a break-up of the euro region.

Moving on to the global economy, only two of the 16 fund managers said that the US recovery would lose steam so much so that the US Federal Reserve would launch a third round of quantitative easing.

The US dollar is expected to strengthen against other major currencies, while Asian currencies could strengthen against the greenback.

Almost all said that a hard landing was unlikely for China, with Allianz Global Investors Singapore saying that recent loan data showed the credit squeeze on the country easing.

Separately, a Singapore Exchange (SGX) release yesterday said that the Straits Times Index rose 8.8 per cent in the first half of the year, outperforming other advanced economies.

This was due to the Monetary Authority of Singapore's policy of modest and gradual appreciation of the Singapore dollar, as well as a diversified portfolio of stocks making up the STI, said SGX.

For the first half of the year, the top five STI stocks in terms of total returns including dividends were CapitaMalls Asia (39.8 per cent), Sembcorp Industries (30.8 per cent), Sembcorp Marine (30 per cent), Hongkong Land (27.9 per cent), and City Developments (27.5 per cent).

The bottom five were Wilmar International (-27.3 per cent), Olam International (-15 per cent), Genting Singapore (-6.1 per cent), Golden Agri-Resources (-3.9 per cent) and NOL (-1.8 per cent).

The five largest stocks on the STI that account for 40 per cent of market capitalisation all posted total return gains: Singapore Telecom (6.8 per cent), DBS Group (22.9 per cent), OCBC (14.2 per cent), UOB (24.9 per cent) and Jardine Matheson (4.7 per cent).

This article was first published in The Business Times.