16 January 2019
Gold is a good hedge against increasing market risks. Photo: Bloomberg
Gold is a good hedge against increasing market risks. Photo: Bloomberg

Gold likely to post another 10 to 20 percent rise this year

Financial markets are getting more volatile as we step into the Year of the Monkey.

The eurozone debt crisis has had an impact on financial markets during the three-day Lunar New Year holiday.

According to feng shui experts, Hong Kong would have a tough start this year, but things would start to improve later. We should get ready first and prepare for the best to come.

Planning for the future is critical. Hong Kong has to capture the opportunities of China’s economic restructuring in the next decade. The city has great strength in financial services.

Hong Kong, located in South China, will see the star of Fortune this year. And just as the monkey likes to hop around, the stock market will witness heightened volatility this year.

Investors should have more flexibility and less greed in order to make money amid the volatility.

They could also invest in the volatility index of the Hang Seng Index or the United States VIX as hedge against the volatile market.

They could also buy gold to hedge against increasing market risks. The yellow metal should have another 10 to 20 percent upside this year, and aggressive investors could buy gold stocks or relevant funds.

Last week, gold and precious metal funds have posted the best performance, with some funds even soaring by more than 15 percent.

Investors who invest in South Korea should also be vigilant about geopolitical risks in North Korea.

Europe, Taiwan and Japan would enjoy the best of luck this year. Things are improving in Vietnam and Myanmar.

Investors could collect some stocks at low levels when the eurozone debt crisis emerges again, and sell all when the market rebounds.

China might encounter more troubles this year. The United States and Japan are joining hands to stem China’s expansion in Southeast Asia.

As the world’s largest weapon supplier, the US has to create or encourage more wars to sell more weapons.

It could sell weapons to Israel and Saudi Arabia after fomenting conflict in the Middle East.

It is also pivoting back to Asia, which would create more opportunities to sell weapons to Taiwan and ASEAN nations.

The terrorist threat is always there, and Russia, Beijing, New York and Canada are likely to become targets.

Investors should be careful about placing bets in Western Europe where large inflows of refugees could trigger terrorist attacks.

Global market sentiment is getting increasingly pessimistic. Investors should be more defensive this year.

Nevertheless, regions that will suffer the biggest drop in the first half could outperform in the second half of this year.

This article appeared in the Hong Kong Economic Journal on Feb. 11.

Translation by Julie Zhu

[Chinese version 中文版]

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Founder and Managing Director of Pegasus Fund Managers Ltd.

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