Despite the relative political uncertainty and Liberation Day tariffs, the US market remains popular amongst investors due to its heavy focus on technological innovation, says Yujun Lin, CEO of Interactive Brokers Singapore.
While investors’ immediate reactions to the tariffs were to derisk their positions, Interactive Brokers saw a 24% increase in ending client margin load balances compared to the prior year, Lin adds in an interview with The Edge Singapore on June 3.
To be sure, Lin notes that the US-led tariffs don’t affect the stock market as much, which is still “free and fairly traded”. And amid the geopolitical and trade tensions, investors are still focused on fundamentals.
To his point, the S&P 500 closed above 6,000 points on June 6 (US time) for the first time since February due to stronger-than-expected jobs data from the US and ahead of the US-Chinese trade discussions set to take place on June 9.
Stock prices also come down to individual companies’ margins, Lin adds. It’s about how badly investors think the tariffs will affect that particular company and its growth story.
AI enhancing efficiency
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Within the US tech sector, Lin believes there is still room for growth in artificial intelligence (AI).
“AI has driven a lot of that, of [the market’s] growth over time, and I think it continues to be quite a disruptive technology,” he says.
The Interactive Brokers Singapore CEO likened the onset of AI to the rise of personal computing, when Microsoft launched functions like Word, Excel, and PowerPoint. He also believes that AI would make the average worker more productive and help those who are lagging behind. It is least likely to affect masters of their craft, due to the lack of authenticity and insight, although this could change in the future due to AI’s ability to enhance and train itself.
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Room for other asset classes
Beyond US equities, Lin sees options growing in popularity as an asset class as investors, especially sophisticated investors, seek to trade the volatility itself.
On the other hand, asset classes such as corporate bonds and fixed income have become more popular among investors who prefer a less risky approach amid the volatility in equities.
Despite the US credit ratings downgrade by Moody’s in mid May, US Treasuries, which used to be deemed risk-free, still remains the gold standard for a relatively lower risk asset, Lin adds.
SGX a ‘victim of its own success’
Back home, the moribund stock market has been a topic of conversation since the Monetary Authority of Singapore (MAS) launched a review group to strengthen the local exchange in August 2024.
Singapore, which is known for its high standards, can be a “victim of its own success”.
“I would say the Singapore market reflects the journey of the country,” says Lin. “We are high quality, very stable, and in a very uncertain world, people tend to seek stability and quality”.
Yet, everything is a trade-off. For instance, on the Singapore Exchange(SGX), high-quality stocks come at a cost. They are less volatile and may be seen as less exciting to trade.
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“Over the years, SGX has become a little more yield-driven. Blue-chip stocks, REITs, and that, I think, attracts a certain type of investor,” he muses. “And because the prices are so stable, the turnover is not high or not the highest… [but there’s] nothing wrong with having a high-quality market. It's just that, how do we grow that market?”
“Overall, it’s high time we did something more about it,” he continues.
When asked about the timing of the review group, Lin attributes this to the intellectual and emotional maturity of the investor base. The way he sees it, prioritising investor protection over the past decade or so, has been good for investors but less so for the growth of the stock market.
To this end, rationalising investor protection regulations for “a more business-friendly approach” and the Monetary Authority of Singapore’s (MAS) $5 billion equity market development programme (EQDP) could bring vibrancy back to the market, in particular benefiting mid-caps.
Conservative fiscal policies and running a balanced budget also bode well for hot money, which seeks stability and safety. Other segments of the Singapore economy such as tourism will do well, barring a global recession, which will hit everyone equally.
While Singapore’s trade-heavy economy will be affected by trade wars and recession, in the medium term, with the reconfiguration of supply chains, strategic locations, and friendly business ties with other countries, Singapore will fare decently, Lin believes.
“Maybe one day, you know, Switzerland will be the Singapore of Europe,” Lin says.
Singapore market getting more attractive amid instrability; US momentum 'difficult to disrupt'
However, Lin still views the Singapore market as “interesting” and notes that it has done “tremendously well” in the past year.
“We see more of this coming to play as the world gets messier and Singapore gets more attractive,” says Lin.
However, he acknowledges that the local bourse is still “very much” a yield-driven market and lacks, at the moment, a “substantial tech sector”.
Yet, the lack of blockbuster initial public offerings (IPOs) and unicorns is not limited to Singapore but is a global problem outside of the US.
Lin attributes this to the US market’s “deep liquidity and strong valuations”, which have attracted investors, particularly tech investors. “Over the years, this has become a positive reinforcing loop,” he explains.
Despite natural de-risking behaviours in the wake of Trump’s announcement, investors are continuing to buy more US stocks than they sell in the past six months, adds Lin.
“I think people continue to believe that there’s overall growth in a global economy, and particularly US stocks,” he says, concluding that the demand for assets hasn’t gone away despite global volatility.
“I think the US momentum is very difficult to disrupt,” he says, adding that even with tariffs and the disruption in immigration policy, the superpower would still remain competitive.
The rest of the world would take a long time to play catch-up and replicate success at a sustainable pace. Money that can be utilised towards essential services and other sectors would have to be reallocated to grow the economy.
On IPO listings and delistings
On the recent spate of delistings from the SGX, Lin believes that delistings are a “healthy function” of the market and are a “normal part of the process”.
After all, listing on the SGX comes with obligations, including compliance, managing investor relations and listing fees.
These will be weighed against the potential benefits of raising money and whether a company could potentially live with increased scrutiny and obligations.
Expounding on the recent spate of IPO delistings, Lin believes that valuation is key when determining if a company should delist, as privatisation would award a company with autonomy and control, which could streamline the process of regaining profitability.
The lack of liquidity would be a secondary concern, says Lin, as privatisation incurs costs.
“Fundamentally, we need to look at the underlying company [and ask questions like] what kind of valuation does it actually deserve [and] does it have fantastic growth prospects? [Is] the market is not valuing it correctly?”
Naturally, everyone always wants more listings, which are two separate considerations, he adds.
Asia markets
Among the Asian markets, which are the second-most popularly traded among Singapore retail investors surveyed by Interactive Brokers Singapore, northbound trading via China’s Stock Connect platform has also been popular amongst investors, and the Japanese market has also seen “a bit of a renaissance”, says Lin, which he attributed to the latter’s improvement in corporate governance.
The brief period of cheap Japanese yen (JPY) also made the valuations of Japanese companies more attractive.
India still remains a difficult-to-access market for international investors due to capital controls, consisting primarily of taxes, impeding brokers from gaining access.
Round-the-clock-trading
On trading trends, overnight trading is “almost inevitable” given the technology-driven world we live in, said Lin, predicting that markets will begin to trade for 24 hours in the future.
After all, the world is practically getting updates 24/7 via social media and using AI tools.
