Despite a backdrop of recession fears from the global trade war, global equities gained 23 percent in 2019, while the U.S. equities market continued its bull run for the 11th year.
«You're not going to see a world that is going into recession over the course of this year,» said DBS chief executive Piyush Gupta said, noting that there is a chance of modest deflation around the world, but he said «that is not a bad place to be.»
Speaking at DBS Private Bank's 1H20 outlook on Thursday, Gupta discussed the big trends that will shape financial markets in the near term: the persistence of easy money and low interest rates, the rise of the sustainability agenda, and widespread civil discontent due to income inequality and a generational divide.
1Q20 Outlook
Presenting the bank's outlook for the first quarter of the year, chief investment officer Hou Wey Fook (pictured below) said that equities are «still the only game in town,» given the continued bull market and ultra-low rates and bond yields today. He advised investors to focus on «IDEA» companies: innovators, disruptors, enablers and adapters.
Hou Wey Fook, chief investment officer, DBS Bank
According to the bank, portfolios should continue to focus on income-generating assets such: Singapore REITS, China banks, Europe oil majors, and Europe bank AT1s; and secular growth investments: equities that are beneficiaries of a digital economy, an ageing population, and a growing China middle class.
It noted that key themes for the sector include e-Sports, which is «the next sector to benefit from the new millenial wave» and semiconductors, which form the backbone of digitalization.
Singapore Benefits
While Gupta said Singapore is «generally overpriced,» he is optimistic about the country's prospects, particularly as Southeast Asia continues to boom and the wealthy flock to the country and continue buying property here.
«I think there's going to be a continued shift in investment appetite into Southeast Asia, and Singapore tends to benefit from that,» he said, likening the city-state to Monte Carlo in how it is attracting the region's rich who want a safe place to live and park their wealth.
India Opportunity
Gupta called himself a contrarian when it comes to India and said he is bullish about the country in the medium-long term, as he believes the fiscal and economic changes the country has undergone in recent years will have long-term positive consequences.
«The fact that the economy is slowing down, should be a good entry opportunity,» he said, noting that DBS is doubling down on India, growing its footprint from 12 cities two months ago, to 30 currently and 40 by mid-2020, which will support the bank's digital presence in the country.
Sustainability is Key
Gupta said that sustainability is «going to be the biggest game in town over the next five to 10 years,» especially as institutional money will start going into environmental, social and governance (ESG) investments in a big way.
«I think getting in on the ground floor of this sustainability trend is a smart business move, irrespective of how you feel about it… so much money is going into this sector that anybody who gets in early is going to benefit a lot,» Gupta said.
