Investors should increase holdings denominated by the yuan and the US dollar this year to lower the risk of currency volatility, as quantitative easing in Europe and Japan may keep the euro and yen in weak positions, several foreign banking institutions said yesterday.
HSBC Bank (Taiwan) Ltd vice president of wealth management Steve Chuang (莊懷德) said the US’ steady economic recovery and its likelihood of tightened monetary policy might keep the US dollar stronger, compared with other major currencies this year.
“Investors may allocate about 40 percent of their assets to the US dollar, which could help them enjoy exchange earnings,” Chuang told a news conference in Taipei.
Chuang added that investors should watch yuan-based holdings, which could account for 20 percent of their assets, for diversification.
In comparison, the euro, Australian dollar and yen might stay weaker, due to stimulus or the economic slowdown, Chuang added.
Citicorp Securities Investment Consulting Inc (花旗投顧) vice president Spencer Wang (王進彰) said regional investors should hold the New Taiwan dollar this year to further ease volatility risks.
In Taipei trading yesterday, the NT dollar closed 0.5 percent higher at NT$31.553 to US$1, as foreign funds fueled local stocks and the yen rose after the Bank of Japan maintained its stimulus.
The rise matched one on Friday last week that was the most since Aug. 5 last year, Bloomberg News reported yesterday, citing Taipei Forex Inc’s data.
Wang said he held a relatively conservative attitude on commodities, especially gold, this year.
Although gold’s capacity may peak this year — offering price support — Wang said high debt ratios at several mining firms could prompt them seek funds by issuing shares, diluting their earnings.
Chuang said gold’s price may obtain some support later this year, with HSBC estimating its average price this year to be about US$1,234 per ounce.
Chuang and Wang agreed that equity investments among global securities could see positive returns this year, with stocks with steady dividends to be priority targets.
However, Allianz Global Investors Taiwan Ltd (德盛安聯證券投信) said investors should still maintain a certain level of bond investments, with high-yield bonds with steady fundamentals — mostly Asian bonds — being preferable.
Legg Mason Global Asset Management investment director Ajay Dayal said the US high-yield sector might offer the best yield duration trade-offs this year, while US high-quality small-cap stocks are expected to appreciate.
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