Existing clients can use these links to log in to the Infinity dashboard. Not a client? Why not get in touch to find out about our services.
Recovery from high oil prices: lower commodity prices provide shares with a certain breather. We favour sectors with an easily foreseeable development of earnings.
The downward trend of equities that characterised the summer has been stopped. Nevertheless, it is completely unclear whether the recovery in August 2008, partly attributable to declining oil prices, is really a sustainable rally. At a fundamental level, the dynamism of earnings is generally negative. We believe that the valuations, which are attractive in themselves, will be increasingly undermined by the decline in profits in 2009 due to a weaker global economy. A point of light in the darkness were the results of US companies in the 2nd quarter. US firms with strong foreign exposure were able to announce robust growth in profits. In addition, it has become evident in recent weeks that the European economy is now beginning to cool down. And finally, cause for worry is given by the conditions on the money and credit markets, which remain difficult and could therefore burden the stock markets in the future too. Looking at the stock market, the most important development is probably that the ‘buy energy/sell financials’ trade has lost its swing. However, our opinion is that the time to enter into an aggressive build-up of positions has not yet come, particularly not for the shares of investment banks. On the whole, investors are still pessimistic and a lot of cash is parked on the sideline.
Emerging Market equities hit 18-month lows at the beginning of September 2008. These markets are pressured by concerns over a stronger dollar, weaker commodity prices and global risk aversion, while Russian stocks fell over-proportionally. The Russian equity market index (RTS) is down almost 50% from a record high of around 2,500 points set in mid-May, hurt by geopolitical risk on the conflict with Georgia and by worries about government interference in Russian companies. Yet, losses in the Russian equity market are exceeded only in China, where it has been declining over twice as long. The Shanghai Stock exchange is down 65% since it’s all-time high in mid-Ocotober 2007.
The dollar’s surge to an 11-month high in August has reduced the appeal of higher-yielding currencies, and signs of stress in the global growth outlook and the world’s financial institutions are also hampering emerging economies.
Consequently, our sector portfolio is now generally defensive. We are overweighting the sectors of pharmaceuticals, utilities and telecommunications. We also continue to have an over weighted engagement in the IT sector, which is benefiting from a robust, long-term growth. Underweighted, on the other hand, are consumption-related and industrial shares. Our regional asset allocation prefers investment in Western Europe and the US and we would underweight Emerging Markets for the reasons mentioned above. Below the line, we remain relatively cautiously positioned because we believe that the volatility is going to continue in the short term.
We advise investors to proceed cautiously. Recommendable are bonds with a concentration of short terms and bonds from first-class issuers; maintenance of a certain degree of liquidity so that in the coming months, investments can be made in what we believe will be more favourable entry opportunities for share purchases than what exist at the moment; the maintenance of engagements in shares in defensive sectors such as pharmaceuticals; a positioning which expects significant setbacks for those bank shares which have been recording higher prices in the recent past; an engagement in commodity funds after the big price drop and an allocation in selected hedge funds that only correlate weakly with the stock markets. Furthermore, investors should assume that the USD could continue to advance before resuming its downward trend against the European currencies.
This Site and the Content are not directed at or intended for distribution to any person (or entity) who is a citizen or resident of Hong Kong (or located or established in) any other jurisdiction where the use of the Site would be contrary to applicable law or regulation or would subject Infinity Financial Solutions Limited to any registration or licensing requirement in such jurisdiction.
Persons (or entity) who is a citizen or resident of Hong Kong please click on the link below to access our Hong Kong Site.