February 2016

Be smart to outwit the Monkey

Catching the ups and downs in the market may be as difficult as catching a monkey – both are mischievous and unpredictable. Nonetheless, you may be able to outsmart the market by learning more about the overall trends. Check out the following market insights by industry experts to get more ideas on the investment themes with potential growth.


The following article is provided by PineBridge Investments:

Investors will need to be shrewd stock pickers and able to withstand multiple market events to enjoy stable returns in the Chinese Zodiac’s Year of the Monkey.

According to the Chinese zodiac, investors will need to outsmart the clever, naughty and vigilant animal in their quest for good returns. Broad-brush investment style choices, such as size, growth, value, and momentum, are unlikely to be rewarded in 2016, due to heightened volatility and the muted cyclical outlook.

The sign of the Monkey contains Metal and Water, the former is linked to gold and the latter to wisdom and danger, which signals an increased likelihood of further financial events ahead this year.

But there is some good news. We believe 2016 will bring opportunities in long-term themes that play across several industries.  Here are the top investments themes that we believe are likely to play out in the Year of the Monkey:

Domestic demand - Every country has its own unique characteristics and looking at each market through a single prism does not make sense to us. But broadly speaking, we think that domestic demand which is the focus of significant government policy in almost all economies of the Asia Pacific region should continue to improve, thus helping sectors like consumption and investments, especially in China and Southeast Asia.

Energy and especially renewables – Solar, wind and hydro is gaining prominence and is a long term trend. This is a natural follow on to the anticipated growth in domestic demand and the rise of the Asian middle class. As demand for energy increases, innovation will be needed to ensure sustainable power supply.

The Internet of Things – The worldwide Internet of Things (IoT) presents a significant opportunity for investors. The IoT market is expected to grow from US$655.8 billion in 2014 to US$1.7 trillion in 2020 with a compound annual growth rate of 16.9%, according to recent research from International Data Corporation1. In addition to the ever greater numbers of connected devices, scalable growth will be found in non-consumer applications.

Manufacturing efficiency and innovation - In their quest for innovation, reliable quality and timeliness in delivery, the global multinational brands will continue depend increasingly on high quality Asian manufacturers or what we call “Branded OEMs” where OEM is original equipment manufacturer. These “Branded OEMs” (unless they take things for granted), should do well over the medium-to-longer term.

The long-term winner will not be the one who predicts or finds the next big macro trend, but will be the one who is able to understand every aspect of the businesses in which they invest, and put them to work in a portfolio. In short, investors ought to heed the characteristics of the Monkey and apply vigilance and intelligence to their long-term investment objectives and not be swayed by short-term distractions. Our key piece of advice is to keep a level head despite the Monkey’s mischief.

Gong Hey Fat Choy!

Remarks:

  1. Source: IDC, 2 June 2015

PineBridge Investments is a global asset manager with experience in emerging and developed markets, and investment capabilities in multi-asset, equities, fixed income and alternatives.

Disclaimer:

  • The article above is provided for general information purposes only. It does not constitute a recommendation to pursue any investment strategy or take any other action.
  • All investments involve risk. Past performance is not indicative of future results. In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved.
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