The shift towards Singapore and emerging markets is in contrast to growing wariness for US Treasuries. Bhaskar Laxminarayan, chief investment officer for Asia and Middle East, says the 10-year Treasury is no longer the risk-free benchmark. “Possibly the most risky asset of all, is possibly the longer end of the Treasury, and which is why, despite the short end coming down, the long end is not coming down, and at the same time, corporate yields are crashing against the long end.”
However, Laxminarayan is confident in the yield market for anyone who is seeking a “risk-free” kind of portfolio construct. Investors in such instruments can “sail through” this year with their “eyes closed” while earning 5 to 5.5%. “Nothing will wake you up, no risk out there, as far as that's concerned, almost and you could have a nice holiday.”
In addition, Julius Baer does not see any geopolitical tensions affecting markets in general.
“All the things that have happened in the last 12 months, which are very dramatic, such as the US attacking Iran for the first time, Greenland and Venezuela, they're not having an economic impact, and so we don't see them derailing the economy or the stock market,” says Matthews.
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Laxminarayan adds, “We can't see a case for recession anywhere at this point in time which means the world chugs along despite everything.”
When asked by The Edge Singapore if there are any hidden risks that could affect markets like what happened during the global financial crisis in 2008, Laxminarayan says that the answer is “maybe” and “it's something to look out for”.
He adds that the private market has been “ring fenced” from public markets but he acknowledges that there is a large amount of private assets that can come under stress.
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Responding to The Edge Singapore’s query on whether there has been any signs of de-dollarisation due to geopolitical tensions, Laxminarayan says that de-dollarisation has so far been felt through gold, silver and some stronger currencies like the Swiss franc and the Singapore dollar to a certain extent. “That's the first sign of the so-called de-dollarisation trades.”
He elaborates that further de-dollarisation would be slower as it will have to come from the sale of assets in US dollars which will be recycled into asset purchases in other currencies.
“What you've seen is the quick transition to these two [gold and silver] which is why the prices have gone up so much,” he says, adding that most of the de-dollarisation trades will be more measured and why one should not expect the dollar to “sink and burn”.
Interestingly, Matthews notes that over the last 18 months, central banks have increased their holdings in the Norwegian kroner, South African rand, Colombian peso, Singapore dollar and the New Zealand dollar. “So it's those smaller, non-G7 developed [market] currencies for emerging market currencies, where there's a sense things are becoming better, where the central banks themselves have increased their allocations the most,” says Matthews.
