Although it is “tempting” to believe that Donald Trump’s second term as US president will be a “continuation of what we got the first time around”, the coming four years could be “quite different” under the controversial leader, says Mahesh Sethuraman, CEO of Saxo Singapore.
Despite the market pricing in threats of harsh tariffs on China — upward of 60%, according to Trump during his campaign trail — that was not the first thing on his agenda, says Sethuraman to The Edge Singapore on Jan 21, the morning after Trump’s inauguration in the US.
Instead, Trump ordered a study on whether Beijing had complied with a deal signed during his first term, and the next day said his team was discussing a 10% tariff on China starting Feb 1. “We tend to think of Trump as a tariff man, but [Joe] Biden basically followed up [Trump’s first term] and doubled down on exactly what Trump did. So, Biden had the opportunity to undo it. He did not undo it; he actually doubled down on it. So, it’s not so much a Trump policy as it is [an] alleged bipartisan US policy right now,” says Sethuraman.
Banks and asset managers had released their 2025 outlook reports as early as October 2024, speaking in uncertain terms about the US with the caveat that Trump has proven too difficult to predict.
Sethuraman, however, thinks Trump is now “more mature as a politician”. This time, he adds, Trump has the support of tech giants and businesses. Elon Musk, Mark Zuckerberg, Jeff Bezos and even TikTok CEO Chew Shou Zi — whose app went dark in the US for a day ahead of a supposed ban that Trump first proposed in 2020 — attended the inauguration.
Zuckerberg, in particular, made showy changes to his company in the middle of January, rolling back diversity, equity and inclusion policies at Meta, which owns Facebook, Instagram and WhatsApp.
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“It’s very clear that he’s aligning himself with the new sort of government, new powers,” says Sethuraman, “and that’s going to ensure that [Trump] cannot do things that are going to be detrimental to the businesses at large.”
Looking ahead, Sethuraman thinks the US’s outperformance among developed economies will continue in 2025, “not because the US is going to have a stupendous year, but it’s just that the growth prospects in the UK, the Euro [area] — particularly in Germany — and Japan is not looking very rosy”.
While Sethuraman does not see a recession risk in the US, growth will slow “for sure” and returns are likely to be in narrow “pockets” of sectors. “It’ll be a great market for active investors or active fund managers, but most retail investors are not professional investors, so it’s going to be tricky for them to navigate the next 12 months, which is also why we talk a lot about the importance of diversification.”
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Uncomfortable investing
Diversification is an “explicit acceptance of ignorance”, says Sethuraman. “You do not know what’s going to happen in the next 12 months. Some market experts [or] active fund managers might know, and I’m not trying to put them down, but for the average person, it’s difficult for us to decipher the trends that are going to play out over the next 12 months.”
Staying diversified means “acknowledging that you’re going to get some upside by investing in stuff that you’re not interested in”, says Sethuraman. “If you’re comfortable with everything that you own, then you’re not really diversified.”
Sethuraman, for one, has “never believed in energy stocks”, and, like Warren Buffett, Sethuraman has “never believed in buying bonds” either (Buffett’s firm Berkshire Hathaway did, however, load up on short-term US Treasury Bills, amounting to some US$234.6 billion at mid-2024).
This meant Sethuraman missed out on a boom in energy stocks around 2022. “It’s a lesson for me to learn,” he adds.
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Traders versus investors
Investors keen on expanding their portfolios beyond Singapore- and US-listed names should look to Saxo, says Sethuraman, who was appointed Singapore CEO in November 2024 after six years with the company. “We take a lot of pride in offering the widest range of markets, even though the majority of our clients trade just the single US market.”
Saxo’s website, for one, boasts that users can invest in more than “23,000 stocks from Singapore, the US, Hong Kong and 50+ other global markets”.
Singapore’s “fantastic” Central Provident Fund (CPF) system and ageing population means residents are “slightly skewed towards fixed income”, says Sethuraman, and the popular local stocks have “pretty decent” dividends.
These conservative investors could look to banks in Europe, which offer “pretty good, sticky dividends”, he adds.
Finland-headquartered Nordea Bank, for example, boasts an 8.3% dividend yield.
Outside of equities, Saxo also offers exchange-traded funds (ETFs), mutual funds, contract for differences (CFD) and stock and index options, says Sethuraman, who previously headed the firm’s global sales trading team. “We offer futures on everything, including commodities, interest rates and index futures. We even offer [US] dollar/Turkish lira; the carry is massive — there’s a 30% to 35% interest rate differential between the US dollar and Turkish lira.”
Sethuraman says Saxo prides itself on being “the best choice for both investors and traders”. The former refers to those with “day jobs” who make about three or four trades in a quarter, while the latter refers to day traders.
Post-pandemic, “investors” make up about 85% of Saxo Singapore’s 100,000-odd clients (Sethuraman estimates 60,000 of them are active clients), while “traders” make up 15%.
In terms of revenue, however, Saxo Singapore makes “a lot more money” from traders, says Sethuraman.
Saxo Singapore also has “15 to 20” institutional partners in the region — these “white label partners” are brokers in Asia who use Saxo’s platform with their own front-end interface, he adds.
Private banks’ ‘tricky dilemma’
Most of Saxo’s global clients fall into the “Classic” tier, the most basic of the three user categories. According to Saxo’s website, users who deposit a minimum of $300,000 will be upgraded to the “Platinum” tier, while users who deposit $1.5 million or more will be given the “VIP” title.
Users who trade regularly and accrue enough reward points may also be upgraded.
VIP status is assigned “at Saxo’s discretion” to its “most valuable clients”, according to its website. Saxo Singapore’s “500 to 800” VIP users — along with institutional clients — are offered access to a “relationship team” of 15 experts, according to Sethuraman.
These VIP users are often high-net-worth individuals (HNWI) with private banking accounts, but they choose Saxo for its lower fees, says Sethuraman.
While Saxo Singapore does not have the budget of a private bank, the brokerage has a suite at the National Stadium, and VIP users were invited to Taylor Swift’s six-night concert run here last year.
“One of the reasons why we are a profitable broker is because of this VIP segment,” says Sethuraman. “We are competitive; they like our service, and they also bring a lot of business to us. It’s a classic win-win.”
In a bid to establish relationships early with scions and next-generation HNWI, private banks like UBS and Bank of Singapore have launched investing seminars and networking events for the children of their existing clients.
However, the younger HNWI may prefer more agile, digital-first alternatives. “We’ve seen a lot of the younger generation hopping on board with us, even though their parents are trading elsewhere,” says Sethuraman.
While Sethuraman understands why private banks want to spend money there, “just trying to get their attention is not going to solve the problem”, he adds. “What is going to solve the problem is to enhance your technology to be able to cater to their needs. Their needs are very, very clear: I want full transparency, I want a wide array of access to markets, and I want 24-hour availability to trade.”
But no private bank is making enough of a commitment to get there, says Sethuraman, “because what they stand to lose is massive”. “Right now, they have an extraordinary business with pretty thick margins, and the moment you offer an online platform, you’re letting go of the fat margins.”
Sethuraman calls this a “tricky dilemma” for private banks. “They can see the future disappearing in front of them, but it’s disappearing at a very gradual pace. If they start investing in the platform, first, they have to do a good job of it; and second, they hope that the trade-off is worth it, that they get substantially more business for them to offer a much lower price.”
2030 goals
At the midpoint of the decade, what does the country head hope to achieve before 2030? Sethuraman wants to grow the firm’s “pretty solid” institutional business offering, which he thinks is currently “underutilised” by asset managers and money managers.
Sethuraman hopes to convey three messages to retail investors.
First, investors should look beyond the US and Singapore. “There are geographies and sectors beyond what they usually invest in, and it’s important to diversify widely. Our clients are more diversified than the median client on the market, but they are still not diversified enough.”
Second, he hopes to grow Saxo Singapore’s trader base without drawing too clear a line in the sand. “One day, you could be an investor, one day, you could be a trader. We are not judging what people do; we just want to ensure that no matter who you are, you have what it takes to trade with us.”
Finally, Sethuraman wants Saxo Singapore to be a “one-stop shop” for users to make informed decisions about their portfolios. This includes offering a mix of in-house market research and third-party news articles. “I think we are at a pretty good place. By the end of the year, we should have a significant edge over the competition when it comes to that.”
Photos: Albert Chua/The Edge Singapore
