Markets
Citywire printed articles sponsored by:
View the video online at http://citywire.co.uk/money/video/a411643
Ask Citywire: Index-linked bonds and profiting from China's currency
This week we tackle reader questions on buying gold without the currency risk, making money from China's strengthening currency, and whether it's a good time to buy index-linked bonds.
Each week, we tackle the questions posed by readers in the Citywire Money Forums.
Gold without the currency risk
Last week Ken Johnston asked about the best way to buy gold, and we recommended ETF Securities Physical Gold. Because it's an exchange traded fund it's easy to trade and tracks the price of the metal exactly.
But as L Barnett notes, the ETF is dollar denominated, which means that UK investors could lose out if the pound strengthens from its current weak position.
Société Générale recently launched an exchange traded gold fund that is hedged into sterling, so you're shielded from the currency risk – but unlike ETFS Physical Gold it's not backed by gold bullion so you're exposed to the risk of the bank going bust.
The rise of the renminbi
Recently the Chinese government pledged to allow its currency, the renminbi (or yuan), to move more freely against the dollar - and many commentators expect it to rise.
Unfortunately you can't just open a Chinese bank account, but one way to gain exposure to the renminbi is the Neptune Greater China Income fund which invests in dividend-paying Chinese companies.
Is it a good time to buy index-linked bonds?
Economists are deeply divided as to whether current high levels of inflation will continue, or whether the country faces a period of deflation.
So as imonlyhuman asks, is it a good time to commit to a National Savings & Investments index-linked bond?
Our verdict: it's impossible to forecast, but index-linked bonds are a good way of insuring your portfolio against the risk of high inflation. As other readers have noted, your capital is secure, the income is tax free, and you only need to commit for one year.
More about this:
More from us
- Can Chinese currency reform sustain the risk asset rally?
- Ask Citywire: How to buy gold, and what's a subscription share?
- Inflation or deflation? We pit hawks against doves
- Citywire Money Forums
- Gold purchase
- Is now a good time to invest in Savings index linked bonds?
7 comments so far. Why not have your say?
Jonathan
Jul 03, 2010 at 11:07
Re: The rise of the renminbi
Back in 2001 when there was €1.55 to the GBP I thought the Euro was undervalued, so I bought a share ISA in a Euro fund thinking I would profit from any rise in the € to the £, however I couldn't have been more wrong. When currency rises often shares have to go down to reflect that the value of the company internationally is the same. And dividends are often a very very small percentage of the value of the share so this is not really significant.
report thisRichard White
Jul 03, 2010 at 11:30
I like to use multi-asset funds in which the manager takes currency positions. These complement my Equity and Fixed-Income funds and help spread the risk in my portfolio. Yes the TER is much higher than a Global Investment Trust but the volatility is considerably lower,so i believe both have useful roles to play.
report thisJonathan
Jul 03, 2010 at 12:21
My advice is to anyone with assets of say £300k, maybe your house is worth that. To sell up and move to China for 2 years, put the money in a bank account there and move back in 2 year's time to the UK. That way you will see your asset go up directly with the Chinese currency.
report thisJonathan
Jul 03, 2010 at 12:22
Richard White, which fund do you use?
report thisRichard White
Jul 03, 2010 at 12:38
CF Miton Special Situations,it`s a bit of a hybrid i think and unlike anything else i own.
report thisAnonymous 1 needed this 'off the record'
Jul 03, 2010 at 17:59
I like Miton Special Sits too plus check out Troy Trojan and Ruffer Total Return.
report thisJulius
Jul 03, 2010 at 18:08
Miton Special Sits has been good for me too for long time now. It seems to have a knack of not dropping much when markets fall but still benefitting reasonaby from rising markets - as long as you're not too ambitious. I value this kind of fund.
report thisleave a comment
Please sign in here or register here to comment. It is free to register and only takes a minute or two.