ONE way for prudent investors to deal with market volatility is to lock profits in safe havens and re-enter the fray bit by bit as corrections surface, said IPP Financial Advisers investment director Albert Lam.
Mr Lam and the chief executive of ipac Wealth Management Asia, Mr Gary Harvey, both advocate a regular savings approach to investments as investing requires a long-term horizon view and holding power.
"Investors should also make sure, if they can afford it, that they set up a regular savings plan that puts money frequently into global investments markets," said Mr Harvey.
"This approach removes the emotion of investing and ensures that they are investing at all times in market cycles, both on the way up and on the way down."
People should ensure that their core wealth is invested in long-term portfolios that are well-diversified across markets and sectors, he added.
Mr Chris Firth, the chief executive of wealth management firm dollarDEX, advised investors to check the one thing they can control - portfolio risk. This should be adjusted if it does not match their level of risk tolerance.
And there is no better time than the beginning of the year to rebalance portfolios, said to Mr Lam.
"At the start of a new year, rebalancing is a timely exercise to bring an investor's portfolio back in line with his risk profile," he said.
Still, most investments come with risks and it helps to adopt a long-term perspective rather than a trading mentality.
"If you are planning to retire in 10, 15 or 20 years, then don't fret about short-term bad news. Take the bad news as good times to add to your holdings," said Mr Firth.
Lorna Tan
The global economy is expected to see slower growth this year but there are still gems for prudent investors who can stomach volatility and some risks. Let's check out what are the hot investment choices of financial experts and their tips.
THERE are dark clouds on the horizon and things will probably get bumpy this year, but financial experts remain bullish about Asian stock markets.
IPP Financial Advisers investment director Albert Lam said: 'We believe the foundation of the bull market remains intact... We expect market volatility to continue to dominate in the first half of the year. Liquidity will flow into the market again once the volatility picture clears up towards the second half.'
The clouds have become obvious to most observers by now: a possible economic slowdown in the United States, a weak greenback, high oil prices and continued US sub-prime problems that could affect global credit markets.
That last factor is highly significant as banks and securities firms across the world have announced more than US$40 billion (S$57.4 billion) in losses from write-downs related to US sub-prime or highly risky home loans, said Mr Vasu Menon, OCBC Bank's vice-president of group wealth management.
Looking back at 2007
EMERGING markets such as India and China took top spots last year, with returns of 54.9 per cent and 48 per cent respectively.
And despite a turbulent second half, Singapore's Straits Times Index (STI) rose by 16.6 per cent.
Online unit trust distributor Fundsupermart research manager Mah Ching Cheng said global equities have enjoyed strong returns over the past three years. The MSCI Asia Pacific ex-Japan Index has risen 102.5 per cent over that period, while the MSCI World Equity Index went up 36.6 per cent from Dec 30, 2003 to Dec 21 last year.
Hot investment themes in 2008
Asian equities
AMONG equity markets, Asia continues to be favoured by financial experts as the region is likely to outperform in terms of growth.
After all, more than half of the world's population lives in the region, said Mr Lam.
'Per capita incomes that continue to improve in emerging countries, coupled with younger and better-trained workforces, have contributed to the region's consumption ability,' he said.
According to International Monetary Fund (IMF) forecasts, developing Asian economies are expected to grow 8.8 per cent this year, against 2.2 per cent for developed markets.
Fundsupermart has picked Thailand as its favourite Asia ex-Japan market. It cites the improvement in Thailand's expected economic growth, with consumer confidence and spending tipped to pick up once the political situation stabilises following last month's elections.
Emerging markets
FOR Ms Mah, what she likes is the healthy earnings growth for emerging market equities, of which about half are in developing Asia.
She is also bullish about equities in India and China, even though they shot up last year. This is because the two are still among the world's fastest-growing economies and their intra-Asia exports should continue to rise steadily. This could provide support for their equity markets, added Ms Mah.
Mr Lam also likes emerging markets. Their rapid growth has boosted their stock markets and resulted in greater liquidity.
'With better liquidity, demand for these securities will also increase. Key industries have been privatised and/or deregulated,' he said. 'Given this, and appropriate fiscal and monetary policies, emerging markets are tipped to continue their robust growth.'
Technology sector
ALL things tech seem to offer considerable potential. Ms Mah notes that the sector's earnings growth this year is expected to hit the high teens.
The US Semiconductor Industry Association expects worldwide chip sales to post an annual growth rate of 7.7 per cent over the next two years. Sales are expected to hit US$276.9 billion this year, compared with projected sales of US$257.1 billion for last year.
The association said a broader range of consumer products and the emergence of large new consumer markets in Asia, Eastern Europe and South America would be the principal drivers of industry growth in the years ahead.
Commodities
OCBC's Mr Menon is keen on commodities, especially oil and precious metals such as gold, which stand to benefit from supply shortfalls and healthy demand.
Singapore stocks
FOLLOWING the sell-down in recent months, the Singapore market appears 'cheap', said Mr Terence Wong, the head of research for retail at DMG & Partners Securities.
He expects the STI to trade up to 3,903 points this year. It closed at 3,437.79 points on Friday.
His top 10 picks for the year: Armstrong Industrial Corp, ASL Marine, China Farm Equipment, China Sports International, Courage Marine Group, Frasers Centrepoint Trust, Suntec Reit, Synear Food Holdings, Tiong Woon Corp and Venture Corp.
Investors can expect volatility to persist over the short term, said Ms Carmen Lee, the head of OCBC Investment Research.
Her top sector picks include oil and gas, banks and defensive stocks with high dividend payouts and strong historical earnings track records.
Oil prices are expected to remain high due to strong demand from China and India, said Ms Lee, which should boost oil, offshore, marine, engineering, shipyard and steel stocks.
The prime beneficiaries are likely to be Keppel Corp, SembCorp Marine (SembMarine), Cosco Corp and Ezra Holdings.
Keppel Corp's order book came to $13.3 billion in November while SembMarine's came to $7.9 billion in October.
Banks still look good, thanks to robust loans growth and a steady stream of fee revenues.
Though they were not spared in the sub-prime bloodletting, Mr Chris Firth, the chief executive of wealth management firm dollarDEX, said bank stocks will at some point make a strong recovery.
Ms Lee also believes that China's rising affluence will continue to support consumer demand. Infrastructure facilities will also be in demand due to the Olympics this year and the Asian Games in 2010.
China stocks listed in Singapore rose by 44 per cent last year, and the momentum looks set to hold as their valuations are lower than those of their China-based peers.
In its latest strategy report, OCBC Investment Research picked 12 stocks that it expects to rise by an average of 33.3 per cent over the next six to 12 months. They include Cacola Furniture International, China Sports International, DBS Group Holdings and United Overseas Bank.
Potential risks in 2008
FINANCIAL experts point to two dangers: a potential US slowdown and an overheated China market.
Ms Mah said US equity markets are likely to remain sensitive to the negative news coming out of the finance sector, particularly major write-downs related to US sub-prime woes.
'Asian economies that are heavily reliant on import demand from the US would be affected by slower demand for their exports,' she said. 'Economies that are large producers of electronic goods would be the most affected if the US economy undergoes a sharp slowdown.'
This means South Korea, Taiwan, Hong Kong and Singapore might be the most vulnerable.
Also, the growth of these four Asian tigers is expected to slow to 4.4 per cent this year from 4.9 per cent last year, according to the IMF.
However, domestic spending and a positive business environment are expected to continue driving the Asian growth engines.
As for the China market, Ms Mah fears that a strong correction in China's bourses could have a contagion effect on all Asian bourses.
Last year, Chinese equities enjoyed a strong rally, driven by both domestic and foreign investors.
