Investment Outlook 2012 by HSBC

I just attended the Investment Outlook held by HSBC in Makati Shangrila Hotel semi-annually.  And once again, I was served salmon tartine with a sweet slice of pineapple and bits of pear on top for appetizer,  tender juicy chicken breast for main course, and chocolate mouse with hints of nuts and strawberries for dessert.

Highlights of the luncheon seminar.

1)  More european countries are facing downgrades this year.  We are seeing more negative growth in this region.  It does not help that their debt % to GDP are fast rising.  The root problem of EU countries is the very expensive labor costs, save for Germany.  Just for comparison, if US is 100, EU is priced at 140 and Philippines is less than 10.  This would mean their exports won't be competitive and would create a lag on their manufacturing sector.

2)  Indonesia has been upgraded to investment grade and Philippines is not far behind.  We are expecting Philippines to be upgraded to investment grade as well, due to its resilient economy and population.  If that happens, there will much capital inflow as funds will be diverted to our country and will do great to our economy.

3)  In the U.S., when GDP is low (less than 2.5%) , equity and bond yields are almost the same.  The U.S. stocks are currently expensive.  Some good buys are MCDonalds and Nike.

4)  China will experience a surge in their equity market due to change in leadership that will happen in the 4th quarter of this year.

5)  Many may think Germany is well and good right now.  But some warning signs come from the rising debt % of GDP, as compared to the debt % of GDP of Scandinavian countries, which are sloping downwards.

6) Expect gold prices to go down.  The 4th largest holder of gold is Italy.  And Italy may resort to using their gold to solve its debt problems.  Gold is a good buy at 1500 level.

7)  Choose currencies that have low debt % to GDP because these are the economies that will prove resilient to market volatility like AU$.

ROP 37: A No-Brainer Investment

I have been investing for many years now.  I am a believer of investing in the stock market, because like everyone else, I like to see my money grow.    But one problem in investing in stocks is the scary fluctuations.  It's not a friend that will be by your side when crisis hits Wall Street.   Gone are the days when one only needs to invest in blue-chip companies to get a goodnight sleep.  No thanks to the Lehman Brothers collapse in 2008 that brought the giants like Citigroup and Bank of America to its knees.

But one investment has stood strong and mighty in my portfolio.  And that is the ROP bonds I hold.  I currently have ROP 34 bonds with a coupon of 6.375%.  I bought them when bonds are in all time low and ROP 34 was selling at 91.   I bought it again when it was at 95  and another one when it was at 98.   All this time, when investment portfolios are typically wavering in negative and zero profit, my ROP bonds held true and provided me with a 6.375% interests per year.  And most important of all, it is now trading at 119.50.   This means , that for every ROP 34 bond I have that I bought for $91,000,  $95,000 and $98,000 respectively, I would get $119,500 for every bond I decide to sell.    Now, that's pretty neat, isn't it?

When I realized how good my ROP was for my portfolio, I started looking at ALL the series of ROP and see which ones I can still get for a discount.  Im biased towards getting bonds priced at 100 and below.  But alas, I was not so fortunate.  ROP bonds are quite in demand and all series were selling above 100.  I decided to wait.

And so now, my wait is over.  The Philippine government decided to issue $1.5B global bonds with a coupon rate of 5% and maturity on January 2037.   It is currently priced at 100.50.  And you must buy two.  It's one of the quirks of this bond.  Nevertheless, I know a good investment when I see one.  I quickly called my local bank and booked 2 bonds worth $201,000.

I don't even have to keep my fingers crossed.