Keep commodity assets while inflation stays high

WITH inflation pressure set to remain a major concern, the smart money is betting on commodities as the best assets to augment their investment return.

Schroders Investment Management (Singapore) Ltd fund manager Pang Kin Weng has preferred commodities as his most preferred buy-and-hold asset class.

“In inflationary periods, commodities have done very well, even before the war between Russia and Ukraine, crude oil price had been rising,” Pang said at the Schroders Malaysia Investment Conference 2022 yesterday.

According to him, crude oil hit its highest recorded price of US$147 (RM643.86) per barrel during the global financial crisis in 2008, and he expects the inflationary pressures now could see crude retest the price levels.

“I would say that we are really truly entering into a structurally higher inflationary environment. Crude oil has the potential to go beyond US$150 per barrel,” he said.

He added we still rely heavily on fossil fuels as green energy has not been fully developed to the stage where it can fully take over from fossil fuels.

Other inflation assets include real estate, treasury inflation-protected securities, construction and real estate investment trusts (REITs).

“REITs can do well in an inflationary environment because rents typically go up in the initial phase of an inflation cycle,” Pang said.

Pang encouraged investors to relook tourism-related asset drivers such as airlines despite the recovery in the sector at present being still below the pre-Covid-19 levels.

On the global market prospects, he expects headline inflation may be peaking in the near term and thus advised investors to adopt more defensive positions upon further deterioration of the recession signals. — by ANIS HAZIM / pic by Bloomberg