Go backWeLabbers CommunityBehind the ScenesLifestylePromotionLoanAllianzGI AcademyInvestment updatesGoWealthCampaign

Hot inflation warning! | 1-min read

GoWealth4 Apr 2023
During the hot summer, it is already exhausting to walk outside. Apart from the rising temperature, what is worse is that Hong Kong people are simultaneously under the pressure of inflation. The living index in Hong Kong has always been high but in June, the overall consumer price has risen by 1.8% year-on-year1 . It doesn’t seem to be that serious on the surface, but if you look closely, prices of everyday groceries have leapt so dramatically. For instance, we have seen prices on fruits, freshwater fish and fresh vegetables increased by 16%, 13.3% and 10.7% year-on-year respectively1, leaving families struggling under what is already a stressful time. As for motor oil prices, which have been rising by an average of 30% in the past year2, continue to create panic among drivers.Most Hongkongers try to save their hard-earned money by reducing spending and avoiding investment. In reality, continued inflation will actively deprive us of our purchasing power over time. If the annual inflation stands at 5%, then your purchasing power will decrease by 5% every year. If you have HK$1,000,000 assets, with a 5% inflation rate, your purchasing power will reduce HK$226,000 in 5 years and HK$401,000 in 10 years3! In other words, expressing in terms of a cup of coffee that you can buy today, your purchasing power can weaken to only be able to buy 3/5 cup of the same coffee in ten years.Wealth_Insight(blog)_coffee.pngInflation on the rise: Risk VS OpportunityInflation is on the rise, which seems to be negative, but it could also mean attractive investment opportunities. Simply put, interest income and nominal capital gain that are due to inflation could bring good potential returns from an investment. According to PIMCO’s latest investment review, the hike in interest rates has opened a more attractive income path to investors down the road. The reason being the yield of the 10-year US treasury bond has risen from 1.63% earlier to the current 3.25%4, a level which has not been seen in some time. Although existing bond holders will face price losses, investors who intend to enter the market can now expect to enjoy a higher potential return.How can GoWealth be of help?According to GoWealth’s forecast on capital markets, our GoWealth Digital Wealth Advisory Services have factored in the impact of interest rate hikes and inflation on different investment markets5. In fact, GoWealth has forecasted that the long-term potential annual return for global high-yield bonds will meet 4.4%6, and the potential annual return for global stocks will reach 7.3%6, which is believed to be helpful to investors in fighting inflation and keeping their purchasing power.Our GoWealth Digital Wealth Advisory Services and algorithm can assess the returns or loss in short, medium and long term according to your portfolio allocation7. Head to our app and try our goal setting feature – experience how super easy to navigate the powerful GoWealth Digital Advisory.Footnote:
  1. Source: Census and Statistics Department, data extracted from Consumer Prices in June 2022: https://www.censtatd.gov.hk/en/scode270.html
  2. Source: Consumer Council; data extracted from 19 July 2021 to 18 July 2022 based on the average unleaded petrol prices of the top five oil companies in Hong Kong: https://oil-price.consumer.org.hk/en/chart .
  3. Purchasing power reduction amount is calculated assuming annual inflation rate remains 5%.
  4. Source: PIMCO; data as of 22 June 2022.
  5. The algorithm in the GoWealth Digital Wealth Advisory Services relies on the portfolio simulation database containing 12,000 simulation paths for the model portfolios projected over the next 50 years (i.e. 600 months), which reflects our capital market forecast on various asset classes and the model portfolios in terms of risk, return and correlations. Such information and simulations are assumptions only. They do not reflect or project actual investment performance of the model portfolio or performance of any constituent funds therein. The recommendation is not a guarantee that you will achieve your goal.
  6. Forecasted potential annual return reflects our capital market forecast on such asset class in terms of risk, return and correlations. Such information is assumption only, which does not reflect or project actual investment performance or return of such asset class.
  7. Each Model Portfolio corresponds with certain risk profiles and asset classes which consists of a certain number of funds selected by the Bank. The asset allocation of asset classes is determined by AllianzGI and the Bank. The Selected Funds within a certain asset class and their composition in the Model Portfolio will be determined at the Bank’s sole discretion and may vary from time to time.
Important NoticeThis document is for general information only. The information or opinion herein is not to be construed as professional investment advice or any offer, solicitation, recommendation, comment or any guarantee to the purchase or sale of any investment products or services. This document is for general evaluation only. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person or class of persons and it has not been prepared for any particular person or class of persons.
The information or opinion presented has been developed internally and/or taken from sources (including but not limited to information providers and fund houses) believed to be reliable by WeLab Bank, but WeLab Bank makes no warranties or representation as to the accuracy, correctness, reliabilities or otherwise with respect to such information or opinion, and assume no responsibility for any omissions or errors in the content of this document. WeLab Bank does not take responsibility for nor does WeLab Bank endorse the information or opinion provided by any information provider or fund house.
Past performance is not indicative of future results. WeLab Bank makes no representation or warranty regarding future performance. Any forecast contained herein as to likely future movements in interest rates, foreign exchange rates or market prices or likely future events or occurrences constitutes an opinion only and is not indicative of actual future movements in interest rates, foreign exchange rates or market prices or actual future events or occurrences (as the case may be).
You should not make any investment decision purely based on this document. Before making any investment decisions, you should consider your own financial situation, investment objectives and experiences, risk acceptance and ability to understand the nature and risks of the relevant product(s). WeLab Bank accepts no liability for any direct, special, indirect, consequential, incidental damages or other loss or damages of any kind arising from any use of or reliance on the information or opinion herein. You should seek advice from independent financial adviser if needed.
WeLab Bank is an authorised institution under Part IV of the Banking Ordinance and a registered institution under the Securities and Futures Ordinance (CE Number: BOJ558) to conduct Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities.Allianz GI is a leading active asset manager. For details, please visit: https://hk.allianzgi.com/ .This document is issued by WeLab Bank. The contents of this document have not been reviewed by the Securities and Futures Commission in Hong Kong.
Back