Seven in 10 Singapore fund managers see 10-20% upside to Asian equities in 2023
Wong Pei Ting
FUND managers in Singapore are upbeat about Asian equity and credit markets in 2023, going by a survey that polled more than 50 C-suite and key personnel from fund houses with combined assets under management of some US$30 trillion globally late last year.
The survey conducted by the Investment Management Association of Singapore (IMAS) asked the asset managers for their end of 2023 market calls, and the area that drew the strongest consensus was the outlook of the MSCI AC Asia Ex Japan Index.
Seven in 10 are expecting a solid 10 to 20 per cent recovery in equities from this indicator – which captures large- and mid-cap representation across 10 markets in Asia, excluding Japan.
Asked for their outlook of Asian credit, about half believe the year will see a 50 to 100 basis point drop in yield to the JP Morgan Asian Credit Index, revealing broad optimism that prices will go up.
The asset managers were more split on their views of oil prices, with 41 per cent banking on prices staying largely unchanged, while 27 per cent believe that the commodity will rise 5 to 10 per cent.
When briefing reporters on the survey results on Wednesday (Jan 11), IMAS chairman Jenny Sofian, who is also chief executive officer of Fullerton Fund Management, said the optimism around Asia equities comes as their valuations are seen as “attractive”.
A NEWSLETTER FOR YOU
Friday, 12.30 pm
ESG Insights
An exclusive weekly report on the latest environmental, social and governance issues.
She noted: “The interest rate hike in the developed world is a lot more aggressive versus Asia. In investment strategy, sometimes asset managers will weigh the potential…
“When you look at how Asia has been affected a lot more than the developed markets in the last year, we have actually come down to a valuation that is attractive.”
Chairman of IMAS’ development committee Rajeev De Mello said the finding was even more fascinating given that most respondents had answered the survey in the first two weeks of December. “Asian equities started taking off from November, when China started announcing the end of Covid policies… We saw a significant rally in a lot of China tech as well… but our membership still expects 10 to 20 per cent more in performance,” he explained.
He assessed that fund managers probably see China’s relaxation of its restrictive Covid-19 policy after three years as “the light in the otherwise gloomy 2023 marked for a global recession”, pointing out that it will bring about “immediate and substantial impacts” to both its economy and the Asian market in general.
IMAS polls its members annually from 2016, and this is the first time the survey asked for the fund houses’ end of 2023 market calls. The survey also uncovered a growing appetite for fixed income strategies owing to higher yields – one in four respondents pointed to it, making it the third-strongest trend fund managers expect to see this year. Other trends salient to the managers are a continued appetite for strategies around environmental, social and governance (ESG) and impact, alternatives, and private markets.
IMAS said the change in fixed income sentiments came as bond demand has grown across the spectrum including global bonds, corporate bonds, income strategies, fixed maturities, and private debt. Nevertheless, the association said investors are still cautious about allocating to emerging market local currency bonds.
As for the threats facing the investment management industry in Singapore, the survey found that the fund managers foresee the issue of margin erosion persisting, while they see poor investment returns and economic uncertainty as other factors keeping investors at bay. Margin pressure is partly driven by the rise of low-cost passive investment platforms.
Trevor Persaud, who chairs the IMAS’ risk and performance committee, however, said cost-cutting pressures are not expected to hit the industry uniformly as some firms benefited from the rise of alternative investments, where margins are much higher. “Some members had a fantastic, record-breaking year in terms of margins and profits, so those guys that are not as focused on cost-cutting,” he added.
While ESG is still seen as a top driver for growth in the next three years, IMAS reported a slight decline in interest – 68 per cent of fund managers picked ESG investments as a future growth driver this time round, versus 75 per cent in the last survey. More are now seeing an increase in demand for “innovative products”, such as thematic exchange-traded funds, as a growth driver, with 45 per cent picking it, versus 10 per cent in the previous survey.
Copyright SPH Media. All rights reserved.
