Financial markets to remain volatile but opportunities available, say speakers at forum

FINANCIAL markets are expected to remain volatile this year, with slower growth across Asia. But, a combination of China’s reopening and the regionalisation of supply chains are bright spots to look forward to, participants at the UOB Global Markets Economic Forum 2023 said on Wednesday (Jan 11).

China’s reopening was unsurprisingly top of mind among the speakers at the event. Suan Teck Kin, head of research at UOB Global Economics & Markets Research, said the bank has revised China’s 2023 growth forecast upwards from 4.8 per cent to 5.2 per cent.

Peter Chia, senior FX strategist on UOB’s research team, warned of a “V-shaped” recovery driven by domestic consumption. He added that recovery, when it comes, will likely happen only in the second half of the year. 

“The external environment is very challenging. Out of the 5 per cent growth this year, 4 per cent is internal and the 1 per cent we forecast is external, which is very uncertain. Net exports from China are going to be very low because we are expecting recessions in the US and UK,” he said.

Recommending caution about China’s prospects, he added: “In the near term, let’s not get too excited over China. Let the numbers speak for themselves after we see a few months of positive data, then maybe in the second half, it will pick up.”

Chia was among the four panellists discussing how companies can turn risks into resilience at the forum, which was held at the Pan Pacific Hotel.

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Fellow panellist Beh Siew Kim, chief financial and sustainability officer for lodging at CapitaLand Investment, said China’s reopening is a definite boon for the hospitality industry.

“Revenge travel” would definitely happen, added Beh, who is concurrently the managing director for Vietnam, Cambodia, Myanmar, Japan, and Korea at The Ascott.

She said: “We already saw strong demand during last year’s fourth quarter before China reopened. So we are definitely very positive that the recovery will happen.” 

Frederick Chin, head of group wholesale banking and markets at UOB, noted in his opening remarks that “fear of inflation in 2022 will become fear of recession in 2023”. He added: “For now, the policy of a new socio-political consensus on where to land between the two will cause pain either way.” 

UOB’s forecast is that Asean-6 as a whole will grow by 4.1 per cent this year, compared with countries such as the United States, United Kingdom and the euro area at -0.5 per cent. Global GDP is forecast to grow at 2.7 per cent.

In the US, the recession will likely be “mild and shallow” and take place by mid-2023 if not earlier, said UOB’s Suan.

While financial markets are expecting a terminal Fed Funds Target Rate (FFTR) of 4.90 per cent, their house view calls for another 50 basis-point hike in February, followed by a 25 basis-point hike in March.

They expect rates to peak at 5.25 per cent by the end of the first quarter, and a pause in the rate hike cycle for the rest of the year.