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Volatility and Diversification: Investment Ideas for Uncertain Times

Discover three investment funds that offer stability and diversification in the current volatile market. Includes Asian Tiger Bond Fund, European Income Portfolio, and China High Yield Income Fund.

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Volatility and Diversification: Investment Ideas for Uncertain Times

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  1. Fund IdeasEMSDCU Seminar on 18 June 2016 v2016

  2. Background “Volatility” has been the name of the game this year, especially in the equity markets. YTD, except the US that has a slight gain, other major equity markets are still experiencing a loss. - S&P 500 +1.6%; - Euro Stoxx 600 -10.8%; - TOPIX -19.1%; - Hang Seng Index -7.8%; - HSI 300 -16.6% (all in local currency term) Political Concerns - “Brexit” vote to be held next week. - US Presidential election to take place in coming November.

  3. Background Divergence of central banks’ policies - the Fed is ready for rates hike but the pace is likely to be slight and slow - the ECB is implementing its negative interest rates policy - the BoJ is also implementing its negative interest rates policy Low inflation pressure around the globe Low interest rates environment is supportive to high yielding assets Uncertainties in the market boost the demand of safe heaven assets

  4. (1) BGF Asian Tiger Bond Fund Invests in both sovereign and corporate bonds across the full spectrum of credit ratings. Not overly concentrated in Chinese issuers and HYs (average quality still at around BBB) for better diversification. A low-volatility fund with its 3-year annualized volatility only at 5.14%. Country breakdown: ~35% in China, 12% in Indonesia, 9% in India, 8% in HK, 6% in Philippine, 3% in Korea, etc. Credit breakdown: BBB 36%, A 33%, B 8%, BB 6%, AA 3%, CCC 1%, etc. More than 70% are investment grade. Available share classes are USD, and hedged classes in HKD, AUD, EUR, GBP, CAD, and NZD. Latest dividend yield : 5.14% p.a. (Class A6/USD) HKSFC authorized BEA Risk Level: 3 Requires Derivatives Knowledge: No Lending Ratio: 70%

  5. (1) BGF Asian Tiger Bond Fund YTD Performance (1/1/2016 - 14/6/2016)

  6. (2) AB FCP I - European Income Portfolio This fund seeks to achieve a high current income with the potential for capital appreciation by investing in a diversified portfolio of Euro- or European currency-denominated investment grade and non-investment grade fixed income securities. Investment universe: European companies and governments, fixed and floating rate securities issued by governments, government agencies, supranational organizations and corporate issuers. Up to 50% in non-investment grade fixed income securities. Currently ~56% in investment grade bonds. Detailed breakdown: AAA 19.96%, AA 3.58%, A 6.40%, BBB 26.52%, BB 21.38%, B 19.78%, CCC & Below 1.10%, Not Rated 0.17%, Other 1.11%. Taking a credit barbell that offers both income potential and capital stability. Average Credit Quality: BBB; Duration: 5.40 years; No. of holdings: 319 Available share classes are EUR, AUD Hedged, HKD Hedged, SGD Hedged, and USD Hedged. Latest dividend yield: 6.46% p.a. (Class AA/USD Hedged) BEA Risk Level: 2 Requires Derivatives Knowledge: No SFC Authorisation: Yes Lending Ratio: 80%

  7. (2) AB FCP I - European Income Portfolio YTD Performance (1/1/2016 - 14/6/2016)

  8. (3) BEA Union Investment China High Yield Income Fund Investing in China high yield bonds, this fund focuses on stable payout and captures additional return through active management. Aims to pay stable dividend on monthly basis. Credit allocation (as of 31 May 2016): 1.7% IG, 86.9% HY, 3.9% Cash. Currently underweight property against index as the fund managers see valuation more attractive in other sectors like retail companies. Detailed sector breakdown: 57.9% Property, 16.3% Consumption, 6.6% IT, 6.5% Industrials, etc. Detailed country breakdown: 69.9% China, 14.5% HK, 6.6% India, 3.6% Indonesia, etc. Average credit rating: B+ Portfolio yield (as of 31 May 2016): 7.40% Available in USD, HKD, AUD Hedged and RMB Hedged classes BEA Risk Level: 4 Requires Derivatives Knowledge: No SFC Authorisation: Yes First Record Date: 14th July 2016 Lending Ratio: 60%

  9. (3) BEA Union Investment China High Yield Income Fund Since Launch Performance (22/4/2016 - 14/6/2016)

  10. (4) First State Asian Quality Bond Fund This fund has exhibited a low volatility in the past and purely invested in Asia investment grade bonds (both corporates and gov’t related). Currently holding 158 issues with an average credit quality of A-. Credit Breakdown: BBB (45.3% of total fund asset), A (39.9%), AA(8.8%), etc. All are investment grade. Major country allocation include China (36.8%), S.Korea (12.8%), and HK (11.6%). Available share classes : USD and HKD Latest dividend yield: 4.02% p.a. (Class I/Mdis/USD) BEA Risk Level: 3 Requires Derivatives Knowledge: No SFC Authorisation: Yes Lending Ratio: 70%

  11. (4) First State Asian Quality Bond Fund YTD Performance (1/1/2016 - 14/6/2016)

  12. Disclaimer The information in this document or message has been obtained from proprietary and non-proprietary sources The Bank of East Asia, Limited (the “Bank”) believes to be reliable but which has not been independently verified. The Bank makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy, completeness or correctness of the information contained herein. Expressions of opinions or estimates herein reflect the judgment of the employee(s) of the Bank who prepared this document or message only on the date of this document or message and are subject to change at any time without notice. There is no guarantee that any forecasts made will come to pass. Reliance upon information/opinions/estimates in this document or message is at your sole discretion. This document or message is not directed at, or intended for distribution to or used by, any person or entity in the United States or any jurisdiction where doing so would be contrary to the laws or regulations or which would subject the Bank to any additional registration or licensing requirement within such jurisdiction. The information contained in this document or message has not been reviewed in light of the investment objectives, financial situation or particular circumstances or needs of individual recipients. The Bank does not accept any liability whatsoever for any direct or consequential loss arising from any use of material contained in this document or message or otherwise arising in connection therewith. This document or message is for information purpose only and should not be construed as an offer, a solicitation, invitation, advertisement, representation of any kind or form whatsoever or advice/ recommendation to invest, purchase, subscribe for or sell the investment product(s) referred to herein. Any information in this document or message is purely indicative and has no contractual value. Such information is subject to modification at any time without further notice, including as a result of changes occurring with respect to market conditions. Headings of the paragraphs are for ease of reference only. The investment decision is yours and you should not invest in any investment product unless your Relationship Manager has explained to you that such investment product is suitable for you having regard to your financial situation, investment experience and investment objectives. Any investment referred to herein may involve significant risk, value of an investment product may move up or down, and may become valueless. Past performance figures are not indicative of future performance. This document or message does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering into any transaction. Please refer to the relevant offering documents or materials for further information including all the risk factors.. If in doubt, you should seek independent professional advice before making a commitment to purchase or sell the investment product or enter into an investment contract. Companies within the Bank Group and/or their officers, directors and employees may have positions in, and may from time to time purchase or sell or have a material interest in all or any of the financial products and/or securities mentioned in this document or message, or their related securities, or may currently or in future have or have had a relationship with, or may provide or have provided investment banking, capital markets and/or other services to the companies referred to herein and/or any other connected parties. Companies within the Bank Group may act as market maker of and may entitle to receiving brokerage, fees or compensation in respect of any business transacted by them in all or any of the securities or investments referred to in this document or message. This document or message is not intended for anyone other than the recipient and should not be distributed by the recipient to any other persons. It may not be reproduced, distributed or published, in whole or in part, by any person for any purpose, without the prior written consent of the Bank. This document or message has not been reviewed by the Securities and Futures Commission of Hong Kong.

  13. Thank You / 謝謝！

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