In just three months, global markets have already shifted under the pressure of geopolitical tensions, trade wars, interest cycles and changing investor sentiment. For Carmen Lee, head of research at OCBC Investment Research, this is nothing new. With 38 years of experience, she has witnessed several “black swan” events, including the Black Monday crash that marked the start of her career in 1987. “That’s when I realised the markets can be very chaotic,” she tells The Edge Singapore in an interview on March 12.
While each event brings its consequences, the latest “black swan” event, the Covid-19 pandemic, has had a lasting impact on inflation. Five years on, inflationary pressures persist. “People forget that we have now entered into [an extended] period of somewhat elevated inflation. So I would think that this will have caused some impact on the world,” she says.
China’s clarity or US exceptionalism
The contest between the two superpowers — the US and China — continues to shape markets today. Two key political events unfolded almost simultaneously: US President Donald Trump addressed a joint session of Congress, while China held its National People’s Congress (NPC) conference.
Lee says the contrast could not have been starker. Trump lacked clear direction, and his rapid policy reversals made it harder for companies to make investment decisions in the US.
On the other hand, the Chinese displayed “stability and clarity” in reiterating the 5% GDP growth target. There are also a few positive aspects, such as its newly unveiled AI prowess in DeepSeek. The country’s economy is also looking “quite stable,” even though not much was said at the NPC.
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Lee expects institutional investors, having liquidated chunks of their positions in China over the last couple of years, to make a “small switch” from US positions. “[When] the [Chinese market] turns, investors can’t be caught off guard,” she notes.
That said, investors should not completely turn their backs on the US market. Despite the ongoing correction, the world’s largest economy remains “exceptionally good in technology [and] truly [in] the AI space”, which is here to stay and will transform the world and is also the fast-growing tech leader in many aspects. Simply put, investors cannot afford not to invest in US stocks. “They may be very expensive now, but the truth is that they are also the most exciting companies,” says Lee.
Apple, for example, was expensive at every point, but somehow it went up further. The same argument applies to many US stocks, says Lee. “Are they companies with growth potential? They are,” she adds.
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The recent rally in China and Hong Kong and the correction of tech stocks in the US can be attributed to the emergence of DeepSeek. This new AI model is definitely a “game changer”, but she reasons that the ecosystem is much bigger. “You need to have the cloud, the storage, the chip. [There are] so many things that are a part of it, and DeepSeek is only the platform, one of the AI tools you can use. Having the software and chips is still important, and chips are very capital-intensive.”
“Save for maybe the top two, three players, I don’t think any real Chinese competitors can come in anytime soon. Ultimately, one day, maybe yes, but not in the near future. If you don’t have the chip to power your [model], it is going to be very difficult,” she adds.
Even as Chinese stocks regain their footing, Lee points out that valuations for the country’s stocks remain consistently cheaper than those of US technology companies.
Will shares in major companies like Alibaba and Tencent, among the largest globally, return to their previous highs? Lee believes they will, but not immediately. While there is growth potential in these companies, she thinks many investors are still a bit hesitant. “A lot of times, people are just waiting for the actual execution to see whether they can really do what they said they will do. But I would like to think that the re-rating is happening,” she adds. “We’ve already seen the first phase [of re-ratings]. I think the second and third phases will come, but they will take time.”
Liquidity boost
Back home, Lee welcomes changes proposed by the Monetary Authority of Singapore’s (MAS) equities market review group, including the shift towards a more “disclosure-based regime”.
Lee regards the Singapore Exchange (SGX) as having some of the strictest listing rules. Especially for smaller companies going for a Catalist listing, the amount of paperwork required is nearly the same as that for a Mainboard listing, making the IPO process “cumbersome and onerous.”
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When companies list, it is primarily to increase brand exposure to the market, along with the associated media and analyst coverage. She adds: “So if the application process is less painful and the company needs more exposure for its products and services, then these companies may consider listing here.”
“Ultimately, if a company’s market here in Singapore is big enough and if the company needs to raise funds in Singapore dollars (SGD), then it makes it a logical choice to issue or place out more shares in Singapore, in SGD and raise [a couple of million].”
The current process, which has been daunting, is also the same reason why a lot of companies delist, says Lee. “If it is a big company, they have more resources including lawyers, legal advisers, compliance officers and other staff to ensure that all the regulatory and compliance papers are properly submitted and a bigger team of finance staff to handle all the finance-related queries and submissions,” she adds. However, smaller companies will not have the same kind of support.
Lee is optimistic that regulators are aware of the issue, which is why they are streamlining the listing process. The next step is ensuring the maintenance of listing status. She says: “First, get listed, then stay listed.” Still, she warns that the measures will not make a big impact right away. After all, the market has been “quiet for too long [and investors] cannot expect a magic pill and expect the Singapore market to be vibrant [overnight]”.
The lack of liquidity is not unique to Singapore. With an expanding range of investment options, investors can trade anything, anywhere, Lee notes. As a result, local stocks will struggle to match the appeal of US tech giants, which dominate the top 20 global stocks and remain the current favourites. “I don’t think that the Singapore market is suffering… [but] unfortunately, the biggest market is still the US [with] a large part of the funds and investors interest [there].”
Investors’ focus on large caps has resulted in underappreciated smaller companies — a point Lee is conscious of given that her team at OCBC Investment Research is limited to covering companies with a baseline market capitalisation of $1 billion.
These hidden gems require a liquidity boost for them to shine fully. “Smaller companies in Singapore are not very well traded. The concern is, if someone can get into a position, can they get out of it as well? In terms of liquidity, is this stock well-traded? If a stock is listed, but not well traded, it is difficult to buy or sell the shares, which impact the under-researched small-to-mid cap stocks,” she adds.
Beyond interest rates
For now, Lee’s top picks within the local market are the Singapore banks, a sector set to benefit first from the upcoming Johor-Singapore Special Economic Zone (JS-SEZ). Moreover, despite the prospect of rate cuts, banks are expected to perform well this year.
In her view, investors need not worry too much about rate cuts, given that banks have benefited from high interest rates over the past two years. Besides higher rates which drove exceptional earnings, the banks also benefit from substantial non-interest income. Lee recalls how when she gave DBS Group Holdings a target price of $39 in early 2024 when it was then trading at $30 or so, people were sceptical. “They thought that the banking sector was going to collapse and be badly impacted by the [rate cuts], and I had to explain that banks were not just about interest rates,” she says.
“People tend to forget that credit cards are also a very important part of the bank. Card earnings are a very good and significant contributor and is still a viable business. Banks run other business units that are also contributing. These may not be billion-dollar contributors, but are still bringing in money and can be sizeable,” she says. DBS is now trading at a near-record level of $45, making this one of Lee’s best calls in recent years.
“With the current market sentiment, there is a good chance of the Straits Times Index (STI) breaching the 4,000 level. Our STI target range is around 4,060 to 4,280,” she adds.
Like all stock pickers, there will be hits and misses. Not all her calls are wrong but not all her calls are right either. Lee’s motto is to “make more right calls than wrong calls”. “There’s been a mix of very good [calls] and not-so-good ones,” Lee adds with a laugh.
