Trustnet Magazine Issue 21 September 2016 - Page 17

/ HENDERSON / as dividends) – an increasingly attractive income proposition on a risk/reward basis. The picture is reflected across most Asian markets. HOW ARE INVESTORS REACTING? Institutional investors, cognisant of the eroding value in traditional income asset classes, have been changing their allocations towards equities for the first time in history. In Taiwan, the risk-based capital requirements for insurers and pension funds have been raised, which could attract between $25 and $35bn towards equities over the next five years. Singapore’s sovereign wealth fund, GIC, is in talks to buy 7 per cent of Vietcombank in Vietnam. In India, the biggest retirement manager has recently been permitted to invest 5 to 15 per cent of new assets in equities. And the tendency has been for dividend-paying stocks with a low beta – those of lower volatility when compared with the wider market. A market-cap weighted index of 44 Asian stocks with dividends above 3 per cent and betas of between 0.8 and 1 (less than 1 implies lower volatility than the market; more than 1 implies greater) has been climbing, especially since the Bank of Japan introduced negative interest rates. A WHOLESALE CHANGE? Thus far, the steps towards Asian equity income have only been tentative. In