The question on many investors’ minds on the New Moon On Monday — Donald Trump’s Jan 20 inauguration — is whether the world as we know it will Come Undone. Or, indeed, if we should Save A Prayer for Planet Earth as we start unravelling the energy transition policies and the Paris Accord. After all, the new administration in the US believes that climate change is a hoax.
Will The Wild Boys — a confluence of Silicon Valley tech bros like Elon Musk and JD Vance develop a New Religion altogether with the Make America Great Again (MAGA) faithful? Or with Trump’s Notorious capacity and The Reflex of not keeping promises on any SkinTrade he makes, and who will chop his staff and change his mind regularly, Is There Something I Should Know would probably be on all investors’ minds as we figure out the snakes and ladders of global markets’ potential gyrations in the new year.
For those who bet correctly with A View To A Kill on what could be a wild ride in this no Ordinary World as we exit the Dragon Year, we could party all the way to Rio, especially if we were invested in crypto last year. If not, we may remain Hungry Like The Wolf and look for Somebody to save us, but it may be Too Late Marlene to figure out What Happens Tomorrow, for by then, the coils of the Snake would have wrapped around an exposed portfolio. For readers of this column, it may not be a surprise that we may traditionally have to look for a bit of fengshui to find My Own Way at this time of the year.
Go West?
I am no Master Tan Khoon Yong or Joey Yap, and it was pointed out to me that the Snake is a “fire” element animal, and this “wood” year will be supportive of its predilections. The residual fires started at the tail-end of the 2024 Earthy Dragon year and continue to be fuelled by the “wood” in this new Snake year — a fiery one that has lost its feet and claws.
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Events are lining up nicely just before Trump’s swearing-in. Israel and Hamas reached a ceasefire deal just a day earlier, while TikTok started “going dark” in the US as ruled so that the new President can make a deal out of relighting the mobile phones for its 150 million American users while Shou Chew, the Singaporean CEO of the platform, attends his inauguration.
Nonetheless, it seems that investors wading out of the East to find gold in the West will continue to be fraught with unpredictability, no thanks to destabilising wars in the Middle East and Eastern Europe. Shein, a Singapore-based but China-owned global e-commerce firm, is gearing up for a listing in London. The long-awaited IPO may happen or not — given political opposition and questions being raised to both the Securities and Futures Commission and the London Stock Exchange.
There is mild anticipation in Singapore that as the Snake year slithers in, the local IPO markets will open up with significant secondary and primary listings. These include hoped-for exits from 65 Equity Partners of local names with global businesses like Hi-P International and Neon, as well as the introduction of international company AvePoint into our local market. REITS and business trusts are also making a comeback here, including a much-anticipated Japan-backed data centre listing, plus several others.
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At a recent (strictly non-metaphysical) outlook presented by JP Morgan here, there were some interesting golden nuggets, including the US bank’s view that Japan, our 2023 dark horse call, was still the second most preferred equity market globally today. The bank, like many of its peers, favours US equities and is positive about industrials, utilities, technology and financials. Its clients in Asia, as indicated by a survey, were more mixed on the US. The highest proportion, or 70% of the respondents here in Singapore, is of the view that US markets will end the year higher than they started.
China was more interesting. Whilst Asian private clients are generally underweight US equities, which occupy two-thirds of the weight of MSCI World, they are currently already vastly overweight China, which accounts for just 3% of MSCI World. And it appears these clients — with the exception of those in Taiwan — continue to believe that China from here will do better by year-end.
Perhaps these clients, too, were talking up their books. After all, they have been carrying their holdings in China down for four years since 2020 — never mind the mild respite last October. JP Morgan is no longer going as far as to declare China “uninvestible” again; it just thinks there is more upside elsewhere.
Do we believe in the consensus amongst the global and local private banks? Or the wisdom of the crowd amongst their customers? Hindsight is always 20:20, but Chew On This generally does not like consensus or crowded trades — sometimes to the peril of missing out on speculative gains. But at least I’ve kept my shirt — and pants.
Or stay East?
Perhaps my favourite outlook every year since I have been looking at markets is the annual CLSA Feng Shui report, first published in 1992. It would be a fool’s errand to believe in all their tongue-in-cheek but very well-researched predictions. But it is certainly more than just food for thought.
The parable this year is a cautionary tale in which an official felt ill after mistaking the shadow of a bow in his wine for a snake but swiftly recovered once the illusion was dispelled. The story underpins a famous idiom — bei gong she ying — which describes excessive suspicions. With so much to fear and be suspicious about, it is quite easy to find solace in T-bills, whose rates are falling but more gradually so. In the year of the Wood Snake — the CLSA Feng Shui summary is “Stay vigilant, but don’t let unfounded fears hinder your progress”.
According to CLSA, although the 13 lunar months make this an exceptional year, “secret hissings point towards good rises (for the Hang Seng Index) through the spring and winter, a long period of summerish lassitude” with “small falls throughout the year”. CLSA predicts the Hang Seng Index to be a “moderately successful year”, with a flourish marked by sharp spikes in January and December. If the Hang Seng is a proxy for China, this lunar new year, CLSA’s fengshui report validates my buy China on dips, but perhaps with a view to sticking around late into the year’s end.
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A reunion at home
For Singapore, this Wood Snake year has a particular significance: it marks the start of a new 60-year cycle for Singapore as we celebrate SG60. And how far we have come. We are a financial centre punching way above our geographical weight. We are the third largest global forex trading centre, with banks here supporting the region in sustainable finance, debt capital markets and equity index derivatives hub for Asia. For good measure, the number of family offices here has grown to more than 2,000, contributing to the total AUM here of more than $5 trillion.
What’s missing to complete that picture of New York and Chicago of the East? Singapore, like London, is characterised as a safe, steady, as-it-goes equity market. We are known to be investible for those yearning for steady returns from dividends paid at a premium over local bonds. Singapore’s equity assets are backed by a strong, stable AAA-rated currency — something the British do not have at the moment with yet another crisis of sterling and UK Gilts falling, thereby raising borrowing costs.
In a final Dragon of the cycle last year, the STI delivered total returns of more than 20%. The gains have been led by capital gains and dividend payouts by big caps, especially the three local banks that weighed over 40% of the index. There is optimism this spring beyond the long-awaited defrosting of the IPO markets. The capital markets committee convened last year is hoped by some to shock and awe. Optimists are even expecting some preview of the recommendations when the Budget is announced on Feb 18.
With any luck, the measures will also address areas where there are gaps for M&A or revaluation windfalls in the mid- and small-cap markets. Already, we have seen activist investors wade into takeovers, such as Great Eastern Holdings , pushing for more value. Or companies with real assets trading well within their NAV like Frasers Hospitality Trust , which moved over 40% and held on even though murmurings of another privatisation bid had since been denied.
As the market leaders propel the index in SG60, it will be sensible to start sieving through those currently left behind, as much upside remains. A rising tide may carry more boats, and those lagging may have more value to discover, resulting in a larger windfall for the brave buccaneers.
This Lunar New Year, I will be scouring the longer tail of gems amongst our mid and small caps. Aside from the committee’s review, a large pool of funds currently invested in local T-bills may soon be redeployed into risk assets as rates fall at each reinvestment cycle. The obvious sector would be beaten-down REITs, many of which are heavily discounted to their respective NAVs while giving yields of 6%-7%.
Likewise, as we celebrate this festive season and indeed SG60 all year, I am delighted that the Community Chest has launched the SGShare initiative (http://www.giving.sg/sg60share), a simple means for all of us to express solidarity to help uplift those who struggle to keep up, to be supported and to achieve their potential in the next cycle together!
Chew Sutat retired from Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange and he was awarded FOW’sLifetime Achievement Award. He serves as chairman of the Community Chest Singapore
