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  1. 1. Formula to become Rich 2 Global Investment Market Analysis By Charter President - Brian Kwan HK Junior Asset Management Association ( 香港青年資產管理學 會 )
  2. 2. 2 Global Market Analysis
  3. 3. 3 Hong Kong Hang Seng Index
  4. 4. 4 US Dow Jones
  5. 5. 5 US  Huge deficit every year  Trade deficit: USD 68.9 billion (10/2005)  Expenses >> Production  Financial deficit: USD 83.1 billion (11/2005)  Long term weak dollar policy  15th increase of interest rate  4.75%  Significant increase of property prices  property bubble is starting
  6. 6. 6 Developing Countries  Asia  China, India, Korea, Thailand, Japan  Europe  Russia, Hungary, Turkey  Latin America  Brazil, Mexico
  7. 7. 7 BRIC  The most influential term since 2003  Established by Goldman Sac  BRIC: Brazil, Russia, India, China  Present: Total global asset value’s 3.5%  2020: Total global asset value’s 10-16%  2050: Overtaking the G6: UK, US, Germany, France, Japan, Italy
  8. 8. 8 BRIC
  9. 9. 9 China  The fastest developing country  GDP growth : 9.6% (US only 3.5% in 2005)  Financial Market Reforming  QFII (Qualified Foreign Institutional Investor)  12/2005: US 5.64 billion (from 34 institutions)  12/2006: US 10 billion  QDII (Qualified Domestic Institutional Investor) e.g. 中國社保基金  09/2005: US 24 billion (19% stock, 81% cash, bond)  12/2010: US 125 billion (40% stock, 60% cash, bond)  股權分置改革  Currency
  10. 10. 10 China 人民幣兌美元滙價 3 4 5 6 7 8 9 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: Asian Development Bank (ADB) - Key Indicators 2004, People's Bank of China 只是整個升值 周期的開始  RMB depreciated 1.4x since 1986, but GDP growth was 12.4x  7/2005 RMB appreciated 2%  Market predict RMB’s value will be double within 5-10 years
  11. 11. 11 China 美國道瓊斯工業指數 美國納斯達克指數 英國FTSE指數 日本日經225 指數 印度孟買 SENSEX 30 指數 香港恆生指數 香港恆生國企指數 香港恆生紅籌指數 中國深滬300指數 (計入股權分置補償後) 市盈率:12 股息率: 4 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 市盈率 股 息 率 (%) 低 市 盈 率 高 股 息 率
  12. 12. 12 India  The 2nd fastest developing country  GDP growth : 8.5%  Total population: 1.05 billion, just behind China  Over 50% Indian is younger than 25 yrs old Strong consuming power (~40% of total)  20 million of university graduates / year Strong productivity Cheap labor costs  Largest offshore software development center in the world -> 04/05 rose 34% to 17.2 billion US
  13. 13. 13 India  Enterprise management level just behind HK and Singapore  Strategic investment from HSBC  P/E Ratio ~ 21
  14. 14. 14 India
  15. 15. 15 Japan  Economic burst in 1990s  Over loan to enterprise -> serious bad debt -> loss of confidence  Nikkei dropped from 33000 to 8000 (3/2003)  Recovery of Japan since 2004  Continuous decrease in bad debt  2400 billion (9/2005) vs 2100 billion (3/2006)  Ratio: 8.4% (3/2002) vs 2.4% (10/2005)  Enterprise loan demand rose to 5 years’ high  Unemployment rate dropped to 10 years’ low – 4.5%
  16. 16. 16 Japan  CPI (11/2005) rose 0.1%, the first rise in past 5 years  The second largest investment amount since 10/1987 – 530 billion in the last week of Jan 2006  GDP growth accelerated strongly in Q4 2005
  17. 17. 17 Japan  Nikkei rises from 8000 (03/2003) to 17000 (03/2006)
  18. 18. 18 Eastern Europe  Convergence with Western Europe: catalyst for growth, restructuring and reform  Growth prospects in the region are still undervalued  High skills and large natural resources at low prices  Good country and industry diversification  Geared to European growth in FDI
  19. 19. 19 Eastern Europe - EU Estonia 2004 Latvia 2004 Lithuania 2004 Poland 2004 Czech Republic 2004 Slovakia 2004 Hungary 2004 Slovenia 2004 Turkey Romania 2007 Bulgaria 2007
  20. 20. 20 Eastern Europe - FDI  FDI (Foreign Direct Investment) into Eastern Europe grew rapidly over the 1990s  Historically, accessing countries witnessed considerable jumps in FDI (eg Spain & Portugal)  Further opening of Eastern European economies may result in similar upward FDI in-flows Source: 1990-2002, Balance of Payments Statistical Yearbook. World Bank Past performance does not guarantee future results.
  21. 21. 21 Latin America  Mainly Brazil (50%) and Mexico (20%)  P/E : the lowest in the world (8.3)  Rich of natural resources e.g. wood, sugar, mining  Sugar  Ethanol (49% Energy, 51% Food)  Huge demand of Mining from China, India  Reducing the demand of external debt  Mexico: outsourcing center from US
  22. 22. 22 Mining  Demand  Industrialization and urbanization of China and India is having a huge effect on commodities market  China is becoming the world’s largest consumer of raw material  Supply  Lack of investment in previous decade and long lead times limiting supply side reaction.  Fewer and larger companies with management discipline. Most focus on increasing shareholder value.
  23. 23. 23 Mining – China Demand
  24. 24. 24 Mining – Inventories & Prices
  25. 25. 25 Energy - Oil  Demand  Daily consumption: 85 million barrel  Predict: increase 2m barrel / year  China and India’s fast growth  US seasonal demand (Q3 Traveling, Q4 Winter)  Supply  Number of oil farm drops 50% to less than 2500 around the world since 1981  All founded oil will be used within 30-40 yrs.  Oil company don’t want to invest on oil exploitation  Afraid supply > demand (corrupted in 1970s)
  26. 26. 26 Oil History
  27. 27. 27 How to invest in these markets?
  28. 28. 28 Funds  Fund is a pool of money e.g. MPF  Managed by professional fund manager and a team of financial analysis  Have specific objective e.g. China  Have specific strategy and discipline  Diversify to a minimum of 50 companies  Management Fee  Fund Class  Country, Sector, Bond, Currency, Hedge
  29. 29. 29 Method 1  Direct Fund  Minimum amount ~ 10k/fund  Bid-offer spread, redemption charge, fund switching fee, management fee  Managed by your own  You should have time to know the market  You should have knowledge to analysis  Less diversification  Suitable for specific market e.g. China A
  30. 30. 30 Method 2  Lump some portfolio  Minimum amount ~ 150k  Can select max 10 from 100 funds into the portfolio  No Bid-offer, no redemption, free unlimited fund switching  Only have portfolio annual fee and fund’s management fee  Usually managed by Investment Advisor  You don’t need to have time and market knowledge  More diversification and flexible for large asset
  31. 31. 31 Method 3A  Regular Saving  Bank fund saving  Usually 1k per fund per month  Funds are usually managed by the bank rather than professional fund house  Performance is less competitive  You need to change market by your own  Less diversification and flexible for asset accumulation
  32. 32. 32 Method 3B  Regular Saving  Portfolio fund saving  Similar to lump some portfolio  Usually 2k-10k per month for each portfolio  Can select max 10 funds among ~100 funds from global fund house  Usually managed by Investment Advisor  More diversification and flexible for asset accumulation  Most young people nowadays use this  E.g. I’m using one from Royal Skandia
  33. 33. 33 How to design your portfolio?
  34. 34. 34 Formula to design portfolio  Set an investment objective  Know your age and risk tolerance level  Select the platform based on brand name, fund choices, fund range, charges or bonus  Seek advice for market information  Set the proportion for different markets
  35. 35. 35 Sample 1 For young people
  36. 36. 36 Sample 2 For elderly
  37. 37. 37 Q & A Email: briankwan@ieaa.org Mobile: 96548135 ICQ: 3812516 Brian Kwan

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