Sounding Board

Dear Readers,

The global economic and financial environment is extremely challenging. There is much uncertainty and growing concerns of recession in advanced economies as banks in the West are particularly vulnerable to the sovereign debt situation and weakening economic prospects. Markets are experiencing huge volatility across various asset classes. As an investor, you need to stay vigilant during these challenging times and make sure that you understand how your investments may be affected.

It is increasingly common that investors hold diversified portfolios, spread across different products, asset classes and markets across the world. If you hold a diversified portfolio, be alert to changing economic, financial or political developments in local and overseas markets so that you may adjust your investment strategy accordingly.

With increasing market volatility, it is particularly important that you are aware of the risks that your investment portfolio is exposed to. Even the most simple investment products may expose you to risk. The risk is higher with products such as derivative warrants and equity-linked investments.

In addition, products such as structured funds and synthetic exchange-traded funds involve more than one counterparty because of swap arrangements and/or underlying assets. Make sure you understand the product structures and how changes in the creditworthiness of issuers and their counterparties may affect the market value of your investments.

But before making any changes to your portfolio, it is wise to find out as much as possible about the risks and features of the product you wish to switch to and the information on its issuer, guarantor and other counterparties. The websites of the stock exchange, listed companies, and other product issuers are readily available sources of information. Notices from your fund managers, bond or product issuers are also important sources for latest updates.

Always do your homework to safeguard your own interests before you invest or make changes to your portfolio. If in doubt about any aspect of an investment, check with your intermediaries and professional advisers.

To be forewarned is to be forearmed. Ask, understand and invest wisely.

Eddy Fong
Chairman