Inflation heats up | The three-year wallet defense war requires 10% return and Wang Liangxiang grants five investment tools

Special interviews

Written by: Liang Cuili

2021-07-03 10:30

Last update date: 2021-07-06 12:59

The market expects inflation to rise, and how to "anti-inflation" and protect the value of "purse" has become one of the considerations of many investors.

The government launched a new batch of inflation-linked bonds (iBond) earlier, with a minimum interest rate of 2%, but each person only distributes a maximum of 3 lots, which is of little practical effect.

In an interview with "Hong Kong 01", Wang Liangxiang, managing director of DBS Hong Kong Treasury Markets Department (Greater China), estimated that the average inflation rate for the next three years is 3%, which means that investors should return 10% or more in three years. In order to effectively "anti-inflation", he carefully selected five investment tools to help investors choose relevant investment methods to deal with inflation risks according to their risk tolerance.

Food prices have soared, and citizens have begun to feel the pressure of inflation. How to effectively "anti-inflation" through investment has become an issue for everyone.

During the interview, Wang Liang pointed out that investors may consider buying real estate trusts (REITs) if their risk tolerance is low and they feel that the inflation rate will not continue to rise.

Steady income from investment housing

He pointed out that the advantage of real estate trusts is that when the market environment is not good, they still have stable profits. These profits can move up with inflation. "When the economy recovers, many shopping malls or shops can increase rents." Wang Liangxiang is also optimistic about Dawan. The real estate potential of the district, it is recommended that investors consider investing in mainland property trusts. "Inland rents are relatively low compared to housing prices. The government does not want housing prices to rise too fast. When housing prices are controlled, both rents and shop rents will rise, just like Link Development (0823) It has started to invest in small shopping malls in mainland China. Now that there is a Greater Bay Area, even if there is no inflation, it is fine to charge interest because real estate trusts do not have much fluctuation."

In addition to Link, he is also optimistic about Yuexiu Real Estate (0405), stating that its properties in the Greater Bay Area are highly stable. "Yuexiu Real Estate’s rental rate is still as high as 92.8% during the epidemic, and the majority shareholder is Guangzhou City. The government-owned enterprise Yuexiu Real Estate accounts for 38.04% of its shares. It is a state-owned enterprise with real local government investment and stable dividends."

Wang Liangxiang, managing director of DBS Hong Kong Treasury Markets (Greater China), has formulated three anti-inflation strategies for investors with different risk tolerance levels.

Paper and minifigures are preferred for foreign currency

Investing in foreign currencies is also an "anti-inflation" option.

Wang Liangxiang recommends that investors consider foreign currencies that raise interest rates earlier than the United States, such as Canadian dollars. "Canada is not as powerful as the United States in "receiving water", and it is not as good as the United States in buying debt. The inflation rate is within 2% that the central bank can accept; plus the central bank It does not seem to indicate that it is ready to accept the new average inflation target in the United States, so you can pay attention to the Canadian dollar

."

He also mentioned that the interest rate of the renminbi is higher than that of the U.S. dollar. When the U.S. raises interest rates, China’s inflation will also rise to a level sufficient to raise interest rates, maintaining the advantage of the renminbi’s two per cent interest margin higher than the U.S. dollar.

"The flow of funds supports the renminbi. In the first five months of this year, the amount of funds entering China through trade surplus, direct investment, bond and stock market northbound links should be 2.27 trillion yuan, 60% higher than last year. In addition, the digital renminbi will be the earliest. The popularization of central bank monetary policy increases its attractiveness as a reserve currency."

Inflation gold has always been good

During the outbreak of the new crown epidemic, in order to stabilize the economy, the central bank "released water" and global commodity prices continued to rise. Wang Liangxiang believed that investors could consider buying raw materials and metal-related stocks to deal with inflation.

It is worth noting that the mainland split up in May to curb the prices of raw materials and metals. Affected by policy factors, investors can consider related ETFs such as copper and mining in the United States. However, if the market is deemed to have digested the impact of relevant mainland policies, If the price has fallen to a lower level, you can choose shares such as Chalco (2600) and Jiangxi Copper (0358).

Gold is still the anti-inflation choice.

In addition, he pointed out that precious metals such as gold have always performed well when inflation is high. When there is no inflation, the price of gold will fall, and vice versa.

He pointed out that when the core personal consumption expenditure (PCE) price in the United States was 2.5% from 2004 to 2006, the price of gold rose from US$400 to 600 yuan, a sharp increase of 50%. Therefore, it is recommended that investors can also buy gold as an anti-inflation tool. Get used to that long-term interest rates will not be very high. When inflation occurs, real interest rates will be even lower, which is very beneficial to gold prices."

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Buy stocks and see corporate bargaining power

If you want to achieve the goal of "anti-inflation" through different stock portfolios, Wang Liangxiang reminds that inflation is a "double-edged knife" for stocks: when the economy is strong, although the inflation rate is high, corporate stock prices may be The good economic environment has benefited; however, operating costs have also risen at the same time, which has harmed its value.

Therefore, whether inflation is good or bad for the stock depends on the bargaining power of the company behind it. Wang Liangxiang pointed out that investors should choose some companies with high bargaining power and strength, such as Mengniu (2319), Budweiser (1876), LVMH, etc.

TIPS is the most aggressive of many anti-inflation products, and risks should be carefully balanced.

The most aggressive anti-inflation product: TIPS

If the degree of risk tolerance is higher, Wang Liangxiang said that investors may consider US Anti-Inflation Bonds (TIPS).

He pointed out that even if there is deflation, it will not have any impact on investors' direct purchase of the principal of U.S. government TIPS. However, TIPS-related ETFs will use the bond's own coupons to make up for principal losses. If there is a lot of deflation , There is a chance that ETFs cannot pay dividends, so TIPS will be more suitable for investors with high risk tolerance.

TIPS is a treasury bond, adjusted in accordance with the local consumer price index (CPI), with terms of 5 years, 10 years, and 20 years, respectively. The entrance fee is US$1,000 and interest is paid twice a year.

Unlike iBond, the Hong Kong government will redeem it at a reserve price of HK$100 after 3 years, but TIPS will calculate interest at the closing price and will also be recovered at the final closing price.

Inflation Wang Liangxiang Investment Strategy