Investment strategists advised Chinese investors to buy government bonds issued in Asia's emerging markets, as they expect the returns on investment for such bonds will keep rising.
Freeman Tsang, director of business development at Legg Mason Inc, a global investment company headquartered in the U.S., said on Friday ahead of a wealth management forum held by Citibank (China) Co Ltd in Beijing, "Government bonds are the best investment during a period of interest rate cuts.
"From the beginning of this year to the end of April, the average return on Asian government bonds rose nearly 7 percent due to a lowering of interest rates in countries such as China and India. The rates of return will continue to increase as Asian countries will further cut interest rates in the second half of this year."
Apart from government bonds in Asia, he said U.S. stocks will generate decent returns during the rest of the year, as the U.S. Federal Reserve is about to raise interest rates, which signifies a strong recovery of the U.S. economy. Furthermore, the U.S. stock performance will benefit from policies to stimulate economic growth during the presidential election.
He suggested investors to diversify risks through a portfolio of investments in Asian government bonds, U.S. stocks and European stocks with low fluctuations and stable returns.
Eric Tang, head of research & investment strategy of Citibank (China) Co Ltd, agreed with Tsang that overseas investment opportunities lies in government bonds in Asia's emerging markets. Some other opportunities exist in investment-grade bonds and high-dividend stocks, he added.
"At present, the average dividend yield on the global stock market is about 2.7 percent. It is more attractive to investors, compared with the average return of 0.8 percent on government bonds worldwide," he said.
He expect that the pressure for renminbi depreciation against the U.S. dollar will increase after the U.S. Federal Reserve opens the door for interest rate hike, but the renminbi is unlikely to fall sharply. Instead, the depreciation of the Chinese currency will be "moderate and controllable" in the medium term, Tang said.
He forecast that the central parity rate for renminbi against the U.S. dollar will be 6.60 during the next three months and 6.75 in six to 12 months.
