This is a mid-month update to your AutoInvest portfolio. In light of the recent Asian bond market movements, the impact to your overall investments is minimal. The investments within AutoInvest’s portfolio are well diversified. Having a large basket of investment minimises the effects from any one type of investment. Long term investing is never a straight line and small bumps are expected on the journey to greater growth.
- Asian bond market has seen some volatility lately
- AutoInvest’s broad diversification means that there is little impact on the portfolio
- Only 1.36% of AutoInvest’s portfolio is exposed to this volatility
- Announcement from China financial regulators are positive
Below is a summary, for those who are curious and want a more in-depth synopsis.
There has been recent news on a Chinese state owned enterprise, CHINA HUARONG ASSET MANAGEMENT. The Company’s stock was suspended for trading at the end of March due to the Company missing the deadline for its 2020 earning’s filling, arising from disagreement on treatments with its auditor E&Y.
CHINA HUARONG ASSET MANAGEMENT is an investment grade rated state-owned company in China. Its status as the largest among the loan asset management companies, state ownership and high credit rating by local and international rating agencies makes it a popular issuer for investors. AutoInvest indirectly holds bonds of CHINA HUARONG ASSET MANAGEMENT through 2 out of its 4 underlying funds. Since the company and the Chinese government did not comment further on the missed financial filing, the rumour mill started to drive the prices of securities down.
Fortunately, this week’s comments from China’s financial regulators have breathed some optimism into the situation. It was announced the asset manager was operating normally and had plenty of liquidity. HUARONG’S onshore securities unit has reportedly wired funds to repay a local bond due on the 18 of April 2021. Also, the Company is reportedly preparing funds to pay a S$600 million bond due on 27 April 2021. These are positive signs as more than half of CHINA HUARONG ASSET MANAGEMENT bonds held by AutoInvest’s portfolio are maturing in 2 weeks and the fund managers are expecting them to be repaid in full.
Through strategic portfolio diversification, Autoinvest’s portfolio managers were able to isolate the impact of this volatility event within the short term interest rate funds. These funds account for less than half of the assigned portfolio allocation for AutoInvest and each fund uses a large number of securities in their portfolio. The broad diversification of securities limits the risk arising from any single issuer and AutoInvest’s portfolio exposure to these bonds amounts to only 1.36%.
As the situation progresses, our team will continue to act strategically and be in close contact with the portfolio managers in Fullerton Fund Management and UOB Asset Management. We thank our users for the continued confidence and trust in long-term investing.
This article’s content is meant for informational purposes only and should not be relied upon as financial advice. Past performance is not necessarily indicative of future performance.
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