Having attended the DBS Private Bank 2H2019 Market Outlook event, I thought I share a brief summary of what was being discussed and some of the more popular/relevant questions that were asked during the Q&A session.
DBS shared on what they called a Barbell Strategy as seen in the diagram below.
It essentially recommends splitting your portfolio into 2 portions – Growth and Income. On one hand, the Growth portion captures the upside potential from exposure to secular growth trends such as Cloud Computing, AI, Millennial Wave, etc. It is the bank’s view that in the age of digitalisation, traditional sectors are starting to face unprecedented disruption. Hence, the global investment landscape is getting redefined and it is no more “business as usual”. Therefore, having a portion of the portfolio capturing these changing trends would be ideal.
On the other hand, the Income portion generates a recurring and robust cashflow by investing in in assets such as Singapore REITs and corporate bonds. In a world where half the investment grade bonds are yielding 2% and less, it would be better to be investing in corporate bonds and Asia REITs with much higher yields with an investment horizon between 4 to 5 years.
Question: What are the potential black swans for 2019?
- One area of concern would be the negative yielding world that we live in today, where many are taking on a lot of leverage
- Debt balloons are seen in US and EU
- Blue-chip companies are taking on leverage to buyback its own shares
- However, being in a low interest rate environment does not justify taking on huge amounts of debt
- Furthermore, the seed for any recession would be high valuations and high leverage
- We may be living in a low interest rate environment; however, that does not mean we are living in a low probability of recession environment
Question: Do you still like the Singapore REIT sector? It has done well this year already.
- Yes, we will still prefer to stay invested in the Singapore REIT sector
- While the Singapore REIT sector has achieved a performance of approximately 20% YTD, we will not be expecting another stellar performance of 20% in the next half of the year
- However, Singapore REITs yielding at 5% to 5.5% still stands out amongst the regional REITs
- Hence, for the yield portion, we is still attractive to stay invested in Singapore REITs
Question: What is your view of the Singapore residential property market? Up or down in 2019?
- We should monitor foreign capital inflows, as Singapore is still an attractive place for investors to buy a property
- We have seen Hong Kong citizens preferring to own a property in Singapore
- Singapore residential properties are relatively cheaper than that in Hong Kong
Additionally, I will be one of the guest speakers at TheEdge Singapore Mid-Year Investment Forum 2019 this coming Saturday, 6 July 2019. Do come over and say hi if you happen to be attending the event as well! For more information with regards to this event, you may find out more here.