Plenty! A number of questions can be asked which will hopefully provide a glimpse of what we are worried about for 2007. Chief among these questions is Is the Middle East situation stabilizing? How is the US going to extract itself out of Iraq, and at the same time, manage the nuclear issue in Iran? This has serious implications on oil prices and its consequent effect on global growth. Can China cool the over-heated economy and make the much needed economic adjustments without any accident, or policy mis-step? Can India maintain its current pace of economic liberalization? Will we be seeing some roll-back of economic policies in the interests of protectionism? What does the stalemate in US politics mean to the world - both politically and economically? A weak and indecisive US typically encourages and emboldens extremists and militant countries. What about the Avian flu? Would 2007 be the year of the flu pandemic?

Any of these emerging risks can inject uncertainties into the minds of investors and trigger the expected reaction i.e. sell first and think later.

We believe that there are more risks lurking, in addition to those mentioned above. Some of these may already be brewing outside the watchful eyes of the markets and can potentially develop into a crisis, taking all by surprise (e.g. the recent Asian Currency Crisis).
 

We hope the above potential risks will not shock you into inaction. Or worse still, drive you to sell all your present investments and switch into cash. These are probable and possible risks and are by no means certain to develop and crash financial markets. The objective in highlighting these risks is to caution against being over bullish especially after a pleasant experience.

Investing is not about taking extreme positions i.e. selling down your assets and switching into cash for fear that one of the above risks may come true. Rather, investing is about managing risks, managing expectations, managing emotions and managing greed.

For 2007, if you are already overweight on equities, or the recent run up in equities has distorted your long term asset allocation, we advise that you call up our financial advisers to conduct a financial health check and discuss proper actions for your capital.

Greed does not pay. 2007 is a time to rein in greed. Take profit on your equity positions. Do not swing to the other extreme of putting everything into cash. What if the world markets remain benign? Financial assets will continue to do well. You will miss the ride if you are into 100% cash. Moderation is key. Managing risks is key. A well thought-out & balanced portfolio is one where you are not hurt should the environment turn adverse but at the same time enables you to enjoy the upside if the environment remains favorable for financial assets.

Again, we seriously urge you to call up our Financial Advisers for a discussion. They will provide you further insights, especially the countries we remain positive on and those that we have growing concerns due to either deteriorating economic developments or valuations.
 

We are glad to report that your portfolio has done well in 2006. (please click here to see the average returns on our clients portfolios). It is our desire to continue to add value to your capital in 2007. In our subsequent Investment Compass, we will address some interesting themes that warrant your serious consideration for your portfolio.

In the meantime, we wish you a very blessed and prosperous 2007. Thank you.

Look out for our next issue, where we continue to bring you more updates & analysis on the markets.

This document has been produced based on GYC Financial Advisory's research and analysis and represents our house view. It may not be reproduced in any form without the express permission of GYC Financial Advisory Pte Ltd. Whilst GYC Financial Advisory believes that the information is correct at the date of this presentation, no warranty or representation is given to this effect and no responsibility can be accepted by GYC Financial Advisory for any action taken on the basis of the information. The above information is strictly for information purposes only and should not be construed as an offer or solicitation to deal in any product offered by GYC Financial Advisory. Any such investment product offered by GYC Financial Advisory are not obligations of, deposits in, or guaranteed by GYC Financial Advisory Pte Ltd. Any investment product, including investments in unit trusts, is subject to investment risks, including the possible loss of the principal amount invested. Investors may wish to seek advice from a financial adviser before making a commitment to invest in any investment product. In the event an investor chooses not to seek advice from a financial adviser, the investor should consider whether the investment product is suitable for him.

GYC Financial Advisory Pte Ltd is a licensed Financial Adviser and regulated by the Monetary Authority of Singapore under the Financial Advisers Act.

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