Facing up to new norms and staying the course
As this issue of The Edge Singapore goes to print, US President Donald Trump faces an impeachment trial by his political enemies. The internal divide in the US has never been so pronounced and politics so divisive.
Even as Trump defends himself at home, he is busy picking fights outside the US, including with his allies in Europe. By starting the trade war with China, he has won the adulation of certain segments of the American populace. He has also caused the disruption of business and trade worldwide.
Diligent investors can pore over tables and charts and compare yields and valuations. Unfortunately, the most-wellresearched financial analysis is no match for unpredictable politicians. Trump’s tweets move markets — markets and politics are more intertwined than before, and not in a good way.
Unfortunately, many smaller economies are caught between the US and China in this increasingly bipolar world. The decade starting from 2020 is shaping up to be the most divisive since the Cold War ended. While it is easy for affluent investors — leveraging ultra-cheap credit — to buy potential winners from both China and the US, it will be a struggle for the average guy falling behind as the income gap widens.
Low interest rates will continue fuelling the US bull market, which is already 11 years old. And cheap credit has also helped fuel binges in the private-equity space. According to some estimates, US$2 trillion ($2.7 trillion) in “dry powder” is waiting to be used, to fund the next unicorn.
Luckily for the market, the muted IPO of Uber provided some sobriety, and when WeWork aborted its IPO in September, it was a reminder to investors that earnings matter. The private-equity market is slowly letting off some hot air, instead of bursting with a pop. In a sense, SoftBank Group, the key funder behind WeWork, took a bullet for the rest of the market.
Yet, one should not write off SoftBank. Founder Masayoshi Son had a “near-death” experience two decades ago when he lost US$70 billion in the dotcom crash. Yet, he managed to bounce back.
Not all entrepreneurs or industries can stage that kind of comeback, regardless of whether they have the market cycle on their side. Certain industries, such as fossil energy, face a structural decline; certain economies, specifically China, are on an unstoppable ascent.
Naturally, there are risks. For one, China needs to make sure its property market does not crash. Some of its state-owned enterprises and many of the private companies can go under, but not the property market. A hard landing will drag down its economy and have far-reaching consequences.
In Singapore, the health of the property market is an evergreen topic. Where are the hottest launches in 2020? Will the super-sized transactions in the luxury market by foreign buyers continue into the New Year? With the ongoing transformation in the Beach Road-Bugis area, will the district emerge as Singapore’s next tech hub?
Investors who wish to diversify their property portfolios could consider real estate investment trusts, although higher yields could also mean higher risks. There are more choices in the REIT market with more REIT listings in the pipeline.
What are the investment opportunities out there? These are the questions The
Edge Singapore and EdgeProp will try to figure out in the coming year and beyond. Amid all these changes in the global and local markets, our mission remains the same: To provide relevant market insights and help shape intelligent investment decisions.
We hope you, our readers, have benefited from our coverage. And we look forward to another year with you.
Happy New Year!