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Safe investments pitched during uncertain times

Advisors also suggest buying REITs for their relatively high yields

Jan 03,2020
With China and the United States with unresolved trade differences, troubles ongoing in Hong Kong and North Korea tensions ratcheting up again, 2020 could be a challenging year for investment.

Advisors at banks and brokerages are recommending safer assets over risky bets.

The exception might be the electronics makers, as expectations are on the rise for a strong recovery in the semiconductor market, especially with DRAM prices likely to rise on the expansion and increasing use of 5G networks.

DRAMeXchange, the market research company, estimates that DRAM global prices have risen more than 10 percent recently.

“Finding investment opportunities in local IT stocks this year is preferable,” said Seo Jae-yeon, wealth management executive at Mirae Asset Daewoo’s branch in Apgujeong, Gangnam, in southern Seoul.

“There’s a possibility for the shares of Samsung Electronics and SK Hynix, which foreign investors are buying up, rising,” said Kim Hyun-seop, head of the private banking team at Kookmin Bank’s Dogok branch in Gangnam.

Real estate investment trusts (REITs) are also a favorite for some advisors. Those investing in REITs receive a dividend as often as every three months on their holdings.

While the yields vary by product, usually it is around 5 percent annually, which is higher than bank interest rates. However, the investment comes with a risk of principal losses.

“In a time of low interest rates, there is large demand for products with a dividend payment,” said Kim Jin-yeo, head of NH Investment & Securities’ high-end wealth management center in Gangnam.

Private banking experts say it is advisable to buy offshore REITs as well.

In terms of equity-linked securities (ELS), investors are advised to buy the underlying asset rather than the derivative security.

While the markets could face volatility due to factors such as the U.S. presidential election in November, share prices are unlikely to drop precipitously, and it is expected that the markets will generate 5 percent annual returns.

The safest asset is the U.S. dollar.

The value of the dollar rises when trade tensions affect the global market, but its value could drop once the market recovers as investors would shift to riskier investments.

“It would be a good time to start investing in dollars when the won is trading around 1,150 won or less compared to the U.S. dollar,” said Kim.

The won hit 1,223 against the dollar in August last year, but on Dec. 30, which was the last trading day of 2019, it closed at 1,156.4 won against the dollar.

Another popular safe asset is gold. UBS in a recent report projected gold prices to go up from $1,500 per ounce to $1,600 this year.

As numerous countries try to lower the value of their currencies by flooding the market, gold prices this year are expected to go up.

“If the gold price is below $1,500 per ounce, it’s an attractive investment,” said Chung Se-ho, head of Korea Investment & Securities’ private banking center in Gangnam. “Other investment choices include gold investment funds.”

BY HWANG EUI-YOUNG [lee.hojeong@joongang.co.kr]


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