Stay Defensive with Bonds, Gold and Cash
Investors have weathered the choppy seas of 2008 and the first two quarters of this year look set to remain rough as global growth continues to weaken.
Chew Soon Gek, CIO, Asia at Deutsche Bank Private Wealth Management, believes in playing defensive in the current investment climate and staying focused on liquidity, safety and capital preservation.
As such, she views corporate debt, in particular high-quality investment grade bonds, as a way to protect one's wealth.
"If you look at the yield spread of investment-grade bonds, that’s running at about 4%. It’s really high by historical standards, and there’s still room for that to contract," she says.
(Watch interview at left)
As to government bonds, Chew favors those with a shorter maturity date, as they offer a certain level of safety.
Cash is also her preference despite yields being low for the major currencies.
"If we are right about inflation, that CPI could turn negative in a couple of months in the U.S., then cash doesn’t look too bad," she says on CNBC Asia's "Protect Your Wealth". "Because in real terms, you are actually getting a positive return as inflation turns negative, despite low nominal yields. I think within that space, we would look for selective opportunities in some currencies, particularly the Aussie dollar."
Chew also likes gold as a dollar hedge. "As fiscal deficits grow and foreign creditors become less willing to buy U.S. assets, you may have a scenario where the dollar weakens. So gold would be an important insurance," she explains. "In terms of instruments, you could think of ETFs, you could think of many other structured ideas around gold. But we’re thinking clearly of just gold as a commodity, as an asset class."
Catch "Protect Your Wealth" on CNBC's Asia Pacific network every Monday on "Trading Matters", Tuesday on "CNBC's Cash Flow," Wednesday on "Asia Squawk Box" and Thursday on "Capital Connection."