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Presentation to. Agenda. 1. Portfolio Overview 2. Market Review 3. Performance Review 4. Investment Outlook. Hong Kong Baptist University Portfolio Overview – As at 30 April 2001. No of MPF member enrolment: 759. Review of Market Performance – Jan to April 2001. Source: Datastream.

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  1. Presentation to

  2. Agenda 1. Portfolio Overview 2. Market Review 3. Performance Review 4. Investment Outlook

  3. Hong Kong Baptist UniversityPortfolio Overview – As at 30 April 2001 No of MPF member enrolment: 759

  4. Review of Market Performance – Jan to April 2001 Source: Datastream

  5. Market Review • Equity markets were weak in Q1 but started to rebound in April on under valuation and continual rate cuts. • Bonds outperformed equities in Q1 due to continual rate cuts and defensive nature but underperformed since April as equities rebounded.

  6. Performance Review *A guaranteed rate of 4.5% p.a. on qualifying events **Initial cash inflows date of HKBU Source: INVESCO

  7. INVESCO Strategic MPF Scheme Performance Review *A guaranteed rate of 4.5% p.a. on qualifying events **Performance of T Class used for comparable track record Source: INVESCO, Lipper/Watson Wyatt/FTSE

  8. INVESCO Strategic MPF Scheme Performance Review *A guaranteed rate of 4.5% p.a. on qualifying events **Performance of T Class used for comparable track record Source: INVESCO, Lipper/Watson Wyatt/FTSE

  9. Performance Attribution Analysis Jan to April 2001

  10. Performance Analysis Positive • US stock selection positive as we held a “balanced” portfolio throughout • HK stock selection positive as we diversified into mid caps • Our overweight in corporate bonds added value to the bond portfolio Negative • European stock selection underperformed due to the portfolio’s bias towards growth stocks (e.g. Nokia, Ericsson) relative to benchmark index • Japanese stock selection also underperformed due to the growth bias (e.g. Fujitsu, NTT DoCoMo) relative to benchmark index • Performance in Asia was undermined by our underweighting in Australia (more defensive) and stock selection in Korea

  11. Investment Outlook

  12. 7 60 % YoY 6 50 OECD IIP (LHS) 5 40 4 30 3 20 2 10 OECD LEI Brt 1 0 fwd 3mths (LHS) 0 -10 World Semiconductor -1 -20 Sales (RHS) -2 -30 1994 1995 1996 1997 1998 1999 2000 2001 World Economy Slowing Down Source: Datastream

  13. 9 9 % 8 8 Long Bond Yield 7 7 6 6 5 5 Fed Funds Target 4 4 3 3 2 2 1995 1996 1997 1998 1999 2000 2001 Fed Cuts Rates to Avoid Recession Source: Datastream

  14. Global Economic Outlook • US– Slowdown is broadening to other sectors. Fed has cut rates by 2.5%. We do not expect a protracted downturn. • Europe– Economy slowing but will be relatively buoyant than US. Interest rates have been cut in both the Eurozone & UK. • Japan– Economy remains weak. Recent BoJ policy shift to quantitative easing is a move in the right direction. Changes to the government provides some hope of much needed reforms in economy. • Asia ex Japan– Economic growth to be dragged down by global slowdown. Liquidity outlook is stable to positive.

  15. Global Equity Outlook • Equity markets were weak in Q1, but rebounded in April & May on undervaluation & continual rate cuts. A lot of bad news on global slowdown and decelerating earnings growth has been discounted. • US– Market is trading at more attractive valuation. Have been averaging down investments on dips. Maintain OVERWEIGHT. • Europe – Revisions in earnings trailing the US. Cautious on the impact to the markets. Maintain NEUTRAL. Look to increase when earnings downgrades have been fully discounted in valuations. • Japan – Market has rebounded on rate cut and on appointment of new prime minister. May surprise on upside due to undemanding valuation and potential positive developments. Move to NEUTRAL. • HK – HK equities have become less interest rate sensitive. We prefer growth sensitive stocks but have also diversified into other sectors given that growth sensitive stocks are scarce. SLIGHT UNDERWEIGHT TO NEUTRAL. • Asia – Continue to overweight Korea & Singapore. Remain UNDERWEIGHT as we have no exposure to most ASEAN markets. Will benefit from improvement in global liquidity.

  16. Global Bond Outlook • Bonds outperformed in 2000 and Q1 2001 due to rate cuts and their defensive nature but underperformed equities in April and May. • We continue to be positive on corporate bonds. • European bonds are relatively more attractive than USD bonds on further rate cuts. • On total exposures, we are underewight in the US Dollar Bloc, overweight in Europe, neutral in UK, underweight in Japan and neutral in HK. • Overall remain UNDERWEIGHT in bonds.

  17. Asset Allocation Capital CPF Stable Balanced Growth Guaranteed Fund (%) Fund (%) Fund (%) Fund (%) Fund (%) HK Equities - 11 (10)25 (25) 32 (35) - Japan Equities - 4 (4) 8 (8) 11 (12) - Asian Equities - 4 (4) 8 (9) 11 (13) - Europe Equities - 6 (6) 15 (14) 20 (20) - US Equities - 7 (6) 16 (14) 22 (20) - Total Equities - 32 (30) 72 (70) 96 (100) n/a Bonds & Cash10068 (70) 28 (30) 4 (0) n/a * As at April 30, 2001 Figures in bracket are neutral position

  18. Bond Structure – International Bond Fund As at Apr 2001

  19. Bond Structure – International Bond Fund Duration 6.0 years Yield to Maturity 4.7% As at Apr 2001

  20. Bond Structure - HKD Bond Fund Duration 2.7 years Yield to Maturity 5.3% As at Apr 2001

  21. Capital Preservation Fund Average Maturity 85 days Yield to Maturity 4.8% As at Apr 2001

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