Pru Life UK Investments CEO Lee Longa (Photo courtesy of Pru Life UK Investments)
MANILA – The volatility brought about by the pandemic made some investors more risk-takers, especially on the equities market, officials of Pru Life UK Investments said.
In a briefing Monday, Pru Life UK Investments chief executive officer Lee Longa said economic recovery is expected this year and this will benefit more investors who have placed their funds even during the pandemic.
“Right now, I think the total customers we have is around 2,000 already within six months of operations,” he said.
During the same event, Ricky Maddatu, Pru Life UK Investments head of fixed income, said the negative interest rate environment, wherein inflation is higher than the central bank’s key policy rate, has a different impact on the bond market and the equities market.
Average inflation in the first two months of this year alone stood at 4.5 percent, higher than the record-low 2 percent rate of the Bangko Sentral ng Pilipinas’ (BSP) overnight reverse repurchase (RRP) facility.
Maddatu said bond investments are expected to get “very low returns” in the current situation contrary to equity investments.
“Negative interest rates are actually pushing investors towards riskier assets,” he said, citing this started in the past decade, or after the 2007-2008 global financial crunch when the equities market had a bull market.
Charles Wong, Pru Life UK Investment Head of Equities, said there is “a kind of financial repression” among bond investors and savers when there is a negative interest rate.
“But, overall, the picture shows a kind of broad spectrum of risk-taking that was not everywhere in the market in 2007 times,” he said.
Wong said there is now “a huge misallocation of capital” towards the equities market and “valuation has really hit all-time high levels this year especially in the US markets.”
He said risk-taking in the last three months is at a level that has not been seen before especially among retail traders, as well as on cryptocurrencies.
“The consequence (of a negative interest rate) continues to be there. Hopefully, we can see a realignment of those risk return metrics, especially when you are looking at how the central banks position themselves,” he said.
Volatility in the equities market is expected to continue “as long as we are experiencing a very low interest rate environment,” he added. (PNA)
