Global markets are still in the lurch as the China-induced price correction continues, with today’s news that the FTSE 100 and S&P 500 rose while European and Chinese stocks fell summing up the unpredictability of the present situation.
This uncertainty, says Hambi, head of fund of funds at Standard Life Investments, necessitates a hands-on investment approach in order to stay afloat amid the waves of volatility.
“We knew at the start of the year that asset classes were going to be much more volatile because of the widening gaps between policy and growth,” he expanded. “The key thing now is to be active and not just ignore what is going on.”
While some investors are happy to adopt a defensive stance – building up cash positions ready for redeployment once the storm has passed – Hambi sees market ebbs and flows as openings on which to capitalise.
“Unless something has changed fundamentally, when we see these big falls we take the opportunities,” he said. “The most important thing is that this is not the start of a bear market, and if it falls further then it will present some great buying opportunities.”
While Hambi is keen on UK equities – which he believes will benefit from healthy economic growth once waters have calmed – it is on the markets engaged in quantitative easing that he is most buoyant.
Having held overweights in European and Japanese equities throughout the year, Hambi has been topping up those positions in the past couple of days, and plans on adding more if markets fall any further.
He said: “Global corporate earnings growth is going to be positive, particularly in Europe and Japan.
“They are well-supported by the QE programmes, currency depreciation in the euro and the yen has been great for exporters, and the weak oil price is a huge kicker for consumers and companies. Also, both have had banking systems that were not in great shape in recent years. Banks are much healthier now and we are seeing signs of improved lending activity, which is always good for economic growth.”
Hambi’s view that UK property would provide a safe haven in times of trouble, as reported by Portfolio Adviser in July, is also holding firm.
“We still like UK property, which has provided a nice cornerstone and is yielding 5-6%,” he said. “The UK economy is still doing okay, which is leading to good rental growth. Property is still making money in our portfolios, which not a lot of asset classes are doing at the moment.”
However, market undulations stemming from low oil prices have forced Hambi’s hand in reducing what he once viewed as a prime money maker within his portfolios.
“While Europe and Japan are benefitting, there are areas that are being hit by the oil price,” he said. “US high yield makes up around 80% of the global high yield market, and a big chunk of that is involved with the oil industry and is being negatively impacted. In the first three-and-a-half years of MyFolio we were playing the yield theme through high yield as one of our core views and got some great returns – we are now neutral.”
