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| Standard Chartered (SC) Bank Korea's headquarters in Seoul / Yonhap |
By Yoon Ja-young
As central banks around the world are walking a tightrope between a soft landing for the economy and inflation control, investors should be focusing on setting up balanced portfolios to guard against inflation risks, Standard Chartered (SC) Bank Korea advised in a report.
In the report released on Tuesday for customers of its Wealth Management program, the bank pointed out that central banks are walking a fine line between controlling inflation and avoiding a recession. The bank has been releasing a biannual investment strategy report for customers, in coordination with global investment experts of Standard Chartered Group. It is scheduled to hold Wealth Care seminars for its customers around the country from July 19.
"We expect inflation to ease only gradually, causing the Fed to maintain its aggressive stance," the bank noted in the report.
As a result, the financial market is likely to react sensitively to even small variables, it warned, adding that investors will also have to gauge the extent to which risks are priced amid such uncertainties.
It recommends increasing the ratio of bonds instead of equities and including a multi asset fund in the portfolio for constant income flow. Among equities, it advises investors to tilt toward U.K. stocks and Asian stocks ― except Japan ― so as to walk the tightrope safely.
To cope with inflation, meanwhile, investors are urged to take additional defensive measures and decrease risks by resorting to inflation hedging assets such as gold.
"Gold, inflation hedges and private assets can help mitigate risks from Fed tightening," the report notes.
As for assets that can offer investment opportunities, it recommends defensive stocks from the U.S. and Europe while also suggesting cyclical stocks in China and currencies of commodities exporting countries.
Most of all, the bank stresses diverse assets for a portfolio based on the long-term investment theme, while taking a flexible and active approach in order to keep pace with the fast-changing financial market.
"The market won't be easy in the second half of the year either with a range of variables, but we should seek investment opportunities while striking a balance amid uncertainties," said Sachin Bhambani, managing director and head of wealth management at SC Bank Korea.
