Beyond The realm Of possibilities

Transcription

1 Beyond The realm Of possibilities nd Quarter Report

2 Table of Contents - Outlook of U.S. Real Estate Products Performance Review Performance: DFSP Series Market Outlook 25-28

3 Outlook of U.S. Real Estate

4 U.S. economic growth is improving The US recovery continues to be on track from its trough. The US economy is expected to expand at a rate of 2.1% in Q According to the economic forecast provided by Federal Reserve, the Real GDP growth for 2013 and 2014 are expected to be approximately 2.0% and 2.8%, respectively. United States Economic Data (Actual/Forecasts) Source: Bloomberg

5 U.S. consumer confidence index increases Figures show that the US economic recovery did not stall, but rather continue its growth at a steady pace. US Consumer Confidence index has increased to 81.4 in June from The increase in confidence is due to: US Conference Board Consumer Confidence Index Higher expectation of more jobs Better stock market performance Rising home prices Source: Bloomberg

6 Better stock market performance U.S. unemployment rate has multiple consecutive months of decline from 2010 highs, while Fed s monetary stimulus has also pushed up the US stock prices to record highs as well as real estate prices remain strong trend. US Unemployment Rate Dow Jones Industrial Average Source: Bloomberg Source: Bloomberg

7 Housing data remains robust Sales of new homes rose to the highest level in nearly five years in May, indicating substantial strength in the housing sector ahead of recent worries about rising mortgage rates. US New home sales rose 2.1% in May 2013 to an annual rate (seasonally adjusted) of 476,000 new homes. This was the highest level since July Single-Family Home Sales Source: National Association of Realtors ( NAR ), Census Bureau

8 Rapid increase in price According to National Association of Realtors, sales of previously owned homes climbed 4.2% to 5.2 million in May, their highest level since 2009, while median prices jumped 15% on the year. The data suggested the real-estate developers to call for a rapid increase in home building to temper the rapid increase in prices. Median Price of Home Sales Source: National Association of Realtors ( NAR ), Census Bureau

9 Housing price increase in Metro Areas House prices continue to rise. According to the S&P Case-Shiller home price index, which tracks 20 metropolitan regions across the US, showed prices increased 12% year-over-year in April (from in April 2012 to in April 2013), the largest increase since March 2006 and ahead of the previous month s 9.3% annual rise. 20 Metro Areas Housing Data Source:, Zillow, S&P Case-Shiller

10 Housing price increase in Metro Areas Similar to the Case-Shiller release, the CoreLogic house price indices also showed 12% year-over-year appreciation. The Zillow home value index posted a relatively modest year-over-year increase of 5.4% in May. Some of the variation between different house price indices can be explained by difference in data sources and index methodology. U.S. Zillow Home Value Index Source: Zillow

11 Individual cities housing figures For individual cities, on a year-over-year basis, all 20 cities that Case-Shiller tracks have recorded home-price growth for at least four straight months. In April, 19 cities showed improvement on M-o-M basis, with only Detroit remained flat. On the West coast, Phoenix and Las Vegas both saw growth of price gains of roughly 22% Y-o-Y in April. From the above housing figures, the U.S. housing market remains strong upside potential. And in some individual cities, the prices are still well below average. With the situation that U.S. economy continues to improve, the housing price appreciation was expected.

12 Our view We are positive on the housing recovery. The double-digit annual home price appreciation observed in recent months states the strength in the housing market. We expect home price can still rise at a steady pace of 4-5% over the next few years, taking in the consideration of rising rates prompt questions about the impact on house prices. And we expect this will be only a minimal negative effect because housing is still very affordable currently. Price-to-Rent Ratio and Housing Affordability Index Source: CoreLogic, BLS, NAR, GS Global ECS Research

13 Our view Another part of the reasons is recent data indicate the banks are easing credit restrictions. To cope with rising mortgage rates, borrowers may switch between fixed rate and adjustable rate loans. We think banks credit quality and restrictions are always more important than level of mortgage rates. Market and Effective Mortgage Rate Source: Freddie Mac, BEA.

14 Our view Extremely low levels of new housing starts over the past few years means a large number of new housing units will likely need to be built but in the meantime, prices should rise due to demand / supply imbalance. Housing Starts Source: National Association of Home Builders ( NAHB ), Census Bureau

15 Our view Lastly, Fed has clearly indicated a schedule to taper the asset purchase, we believe: Policymakers seeing diminished downside risks to economic outlook Labor market has shown further improvement Thus, we expect various housing activity indicators will stay on their upward trend due to the improving US economy and higher affordability.

16 Conclusion Low Real Estate prices provide an attractive yield for institutional and other investors. Under the international inflation economic situation, real estate investment offers investors a stable and sustainable growth investment opportunities. From the above housing figures, the U.S. housing market possesses a strong upside potential. Demand for existing homes has surged, while limited supply over the past 4-5 years does not meet current demand which provides support to home prices. In addition, these affordable investments accelerate investors to make trading decisions and increase market liquidity thereby.

17 Products Performances 17

18 POWERFUND

19 POWERFUND Stable and Persistent Positive Return The Q2 performance of POWERFUND was in line with the expectation of the fund manger. The fund s NAV was up 1.53% in the second quarter, i.e. bringing the YTD return to 3.24%. The monthly returns were about 0.56%, in line with our target, i.e. diversification through correlations with traditional assets. 19

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22 Performance Review: DFSP Series 22

23 Diversified FX Trading Segregated Portfolio (USD & EUR) DFSP USD Fund rose 1.85% in Q2 of Regardless of the market conditions, DFSP Serial Fund is able to deliver a stable return. DFPS EUR Fund of rose 2.47% in Q2 of The return mainly derived from the performance in arbitrary operation. Comparing to traditional equity fund, the Fund demonstrates its capability to disperse risk and attain higher return-to-risk ratio. 23

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26 Market Outlook

27 Market Outlook Markets were caught by surprise as Ben Bernanke announced the tapering of the stimulus package. On grounds of an improving stability in the US economy based on general economic data in the 1st quarter of 2013, most importantly GDP growth. This has led to a sharp reversal of the Dollar of almost 5%, with increased volatility in the recent months. US Dollar Index Future Daily Price Chart We view the US treasury and Mortgaged- Backed Securities bond funds sell off in the past few months as Dollar positive. This continual sell off of bonds will in effect drive yields higher along with the currency. Our general outlook is bullish on the Dollar for next quarter, as more tapering for reducing stimulus is announced.

28 Market Outlook The Euro is slightly higher versus the Dollar as the currency found support near the 1.28 level set by positions made in the beginning of the 2nd Quarter; off the selloff of the currency in the beginning of February. EURUSD Daily Price Chart Growth and inflation are on a slow recovery, fiscal related problems such as the sovereign debt crisis and rising unemployment implies that economic growth is yet to be anytime soon. We believe the ECB rates will not change any time soon in order to maintain liquidity with banks. We believe there is somewhat of an internal struggle in the bloc which is one of the main constraining factors for the ECB to take decisive action. Short-term we remain neutral on this currency, though look for increased volatility around the end of next quarter.

29 Market Outlook GBP/USD Daily Price Chart GBPUSD saw a significant reversal in losses during the end of the first quarter, since then markets have been fluctuating in and out of gains and losses as the currency pairing was little changed this quarter. The general economy in UK has somewhat improved in this quarter as better than expected data over June indicated moderate GDP growth. Strong retail figures, employment and wages and housing incomes and spending were all positive. Despite all this, the GBP has not been able to make significant ground versus the Dollar. In our opinion the UK s fiscal austerity has constrained economic growth and further easing speculations will continue weigh on the currency. USD/JPY Daily Price Chart USDJPY has reached a high of during this quarter, not seen since the 4th Quarter of Prime Minister Shinzo Abe s objective of 2% target inflation, low interest rates and quantitative easing has weakened the currency by close to 25% since the first quarter of We believe this milestone will cause speculators to increase risk appetite and volatility. Despite this, we believe the BOJ is unlikely to announce new easing measures, as domestic growth remains slow but sure. In the short term there may be a reversal in the Yen, however, in the longer term it is fairly obvious to stick with the Dollar because the US currency is the best performing currency thus far, and the Yen is one of the worst.

30 For further information, please contact Web : Important Notice : This documentation is for discussion purpose only and may not be appropriate for any investor. Without limitation, this document does not constitute an offer. Information, views or opinions expressed in this presentation originates from many different sources and contributors throughout the general community. Please note that the contents do not necessarily represent or reflect the views and opinions of WEALTH MANAGEMENT or their affiliates.