Year of the Taper

I attended a luncheon yesterday by DBS CIO Lim Say Boon, JP Morgan CIO Richard Titherington and Columbia Research Director Robert K. In addition to the good food provided by Ritz Calton Sg, there were also some interesting discussion on the outlook of emerging and developed market going forward.

In its essence, the general focus for 2014 will be on the end of the five year force feeding experiment in the US. This event will likely have a trickling effect on all asset classes. Mr Lim said US equities will be progressively weaned off the so called "portfolio balance effect", where the Fed bought down the yields of US Treasuries, thereby driving up the prices of other asset classes. He said gradual withdrawal of liquidity will likely be offsetted by the expectations of near zero policy rate. So he overweighted Developed Market stocks.

In his view, bonds will likely continue to underperform equities as US government bond yields normalise from multi decade lows. Commodities should face headwinds from a stronger USD, oversuppy of predominantly metal commodities and a growth slowdown in some of the more commodity intensive Emerging Markets.

The three speakers agree on the potential in Singapore Market going forward, seeing how our GDP growth in 3Q13 was broad based and how there was an expansion in both manufacturing and service sectors. However inflation will be back into focus as the number is creeping back to 2% after falling to a low of 1.5%.

During the interesting panel discussion, Robert K who is overweight bias on Developed Markets, talks about automation and robots coming into play in 2014 which could act as a catalyst to lead the Emerging Markets. Richard Titherington however, is bullish on Emerging Markets and stated how interconnected both Emerging and Developed Markets are. He said that it is wrong to think that a property bubble is forming in China as 60% of Chinese property buyers pays pure cash upfront on purchase.

All in all an interesting exchange of views and foresight.