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Feature singapore investor Forum 2008

Sanjiv Duggal, investment director, Halbis Capital Management

Brendan Harper, technical services manager, Friends Provident International

in a unique position for “rapid price appreciation”, because producers could simply cut supply until it become profitable again to dig them out of the ground or grow them at the same levels as before. “Commodity producers can force the price of their assets to go up,” explained Murray, adding: “A farmer can plant half as much wheat but, fundamentally, demand will be the same, so the price will rise.” He added that real assets – which he listed as art, commodities and property – were a vital part of any portfolio because they offset inflation and also improved the efficient frontier of investment portfolios, a point also made by Collins Stewart’s Oliver. Making a case for the continued upward trend in commodity prices, barring the recent volatility, Murray said increased urbanisation, particularly in Asia and Africa, meant demand for commodities would continue. He added: “The power shortages in South Africa are an example of a country being unable to cope with a growing urban population that requires more electricity, roads and infrastructure.”

emerging market performance YtD ’08

% -40

-20

-60

0

-80 EM Asia Em mkts China Brazil Korea As at 24 Oct ’08. Source: Bloomberg, HSBC

Sanjiv Duggal, investment director, Halbis Capital Management Indian equities Duggal began his presentation by running through the roller-coaster ride Indian equities have been on since last year. He highlighted how, as long ago as December 2007, he urged investors to sell out of his fund because valuations had become overstretched, with equities trading at nearly 24 times earnings. In July, said Duggal, a note was sent to investors saying it was time to get back into the market after valuations had fallen off a cliff. He conceded that this move was slightly premature and that Indian stocks then had further to drop. Referring to a chart showing the trailing P/E ratio of the MSCI India Index, he said valuations had now fallen to an all-time low, at around ten times earnings. He described the current state of affairs as a “phenomenal opportunity” to access the Indian market. Duggal highlighted that India had been one of the worst-performing markets in 2008. He said in 2007 the market rose 71% and was ranked third among emerging markets,

India

INTERNATIONAL ADVISER [www.international-adviser.com] DEcEmbER 2008

Russia

tax in asia

Country Top rate W’wide Capital Estate duty/ of tax basis gains tax? gift tax (GT)

Australia 45% Yes Yes No

New Zealand 39% Yes Yes GT (top rate 25%)

Singapore 20% No No No

Malaysia 28% No No No

Thailand 37% No Yes No

Hong Kong 16% No No No

Japan 50% Yes Yes Yes (top rate 60%)

South Korea 38.5% Yes Yes Yes (top rate 50%)

Source: Friends Provident International

but year to date, in 2008 it ranked 22nd out of 25 countries. But he noted that GDP was forecast to continue to grow, probably at around 7% annually in the “next few years”, and probably at a higher rate subsequently as India built its infrastructure and industrial capacity. He estimated that the country was some 20 years behind China in terms of infrastructure and pointed out that China began economic reforms in 1979, while India started a similar process in 1991. If GDP growth followed a similar pattern to that of China, explained Duggal, India was poised for a period of rapid growth. According to Duggal, the biggest issue for the economy was inflation, but he said this was falling and monetary policy was also becoming more accommodating.

Brendan Harper, technical services manager, Friends Provident International Retirement planning in Asia – the tax aspect Harper said many more people were retiring abroad. In Asia, these were often expats who decided to remain in their host country or a country in the same region, or local nationals who decided to retire else-

where in the region. He explained that tax was often overlooked when planning such a move. Considerations included whether when you moved you would be taxed on a worldwide or a territorial basis, what kind of allowances you were given, and what you were taxed on – income, capital gains or gifting and inheritances. Harper said residents needed to find out: n their resident status; n whether there were exemptions for new residents; n if double tax treaties were in place; n how pensions, investments and other holding structures would be taxed; n whether assets would require restructuring before becoming resident. Australia, despite being one of the most popular retirement destinations for Britons, had the secondhighest top rate of tax at 45%, noted Harper. New Zealand’s is 39% and Singapore’s 20%. At 16%, Hong Kong’s is the lowest. According to Harper, Singapore, Malaysia and Hong Kong were all attractive because they had no estate duty/gift tax or capital gains tax and did not have a worldwide basis of taxation.

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