On Friday, I attended Henderson Global Investors 3rd Annual Investment Conference at Fullerton Hotel. The event is very successful and I will share some insights as below:
How long will the equity bull market last?
Bill McQuaker, the head of Multi-Manager Funds, said investors should pay attention to the signs when the stocks bull cycle typically ends, namely
- High commodity price
- High interest rate
- Corporate earnings and profitability are being squeezed.
It is likely it is in a mid-stage bull market where these sign are not obvious.
Risk of potential correlation shocker
While it is conventional wisdom that the bond and equity have negative correlation. Bill showed a correlation chart between S&P 500 total return index and US 10 year government bond total return index.
The negative correlation appeared only after year 2000. However, there were prolonged 20 years since 1980s to 2000 where the correlation was positive.
Investors must be prepared as the “safety” of US government bond is questionable especially when U.S AAA Rating has been challenged by Standard & Poor lately and Moody’s issued a warning that US sovereign rating will be at risk.
Frustrating China market
Andrew Mattock, lead fund manager of “Henderson Horizon Fund – China Fund”, expressed his frustration after running the fund for three years. While corporate earnings have shot up significantly since last year, the Shanghai Index was still trading where it was three years ago.
Although his fund has outperformed the benchmark, a typical long manager will have difficulty to make money in China market, so is a short selling manager.
What is interesting to note to all the China Funds investors is that due to the control of China A shares, majority of all the China fund holders are not Chinese. In fact, 75% of the investors are from Europe. As a result, most of the fund performances are also driven by overseas market sentiment. Investors are expected to see discrepancies of their fund performances comparing to Shanghai Index.
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