How to invest in Singapore with 'both eyes open'

As an Investment Adviser, I work with both local Singaporeans and expats living here in constructing and managing global investment portfolios. We have certainly experienced high levels of volatility over the past 4 – 5 years but it now feels more important than ever to be constantly investing with ‘both eyes open’, allow me to share with you why.

Most investment analysts/strategists will provide relatively short-term (~6 months) investment strategies given the global uncertainties and events that we will see unfold over the coming 12 – 18 months. I have highlighted some of these below:

US Federal Reserve ‘Tapering’

We have seen the word tapering circling the investment media for some time with previous estimates suggesting that we would be seeing tapering now. However, given the recent debacle in US politics that resulted in a short-term shutdown coupled with the fact that US consumer confidence is at historically very low levels it is highly unlikely we will see tapering begin in 2013 at all.

Estimates are currently suggesting March 2013. When tapering occurs, this artificial money will cease to be injected into capital markets and the markets will undoubtedly react. It is the when and by how much that investors must determine and stay alert for.

Bank of Japan – Stimulus Package

‘Abenomics’ is taking place in Japan with the announcement earlier in 2013 of their 1.4 trillion dollar monetary stimulus package. The central bank’s aim is to stimulate inflation and economic growth and we are seeing some signs of economic recovery.

The question for investors is how long the stimulus package lasts, how it is implemented, the sales tax implementation and the inflation rates being released. Some analysts expect the stimulus package to last until the end of 2014 but again investors must remain alert to market reactions to an ending of the stimulus.

ECB – European Central Bank

The ECB has announced in October 2013 that they will be scrutinising 128 of the euro-zone lenders that account for approximately 85% of all lending activity in the region. Just how tough these ‘stress tests’ are going to be is unknown – after all the aim is to build confidence in the system, and transparency could be a dangerous thing if delivered in too large a dose.

It is already clear that some European nations can not afford to rescue their banks so if these stress tests highlight that the banks should not be invested in, then the results are also unknown. Discussions by European leaders continue and will also continue to influence European markets.

China – The ‘sleeping’ dragon

The third plenary session will be shortly upon us which will likely results in some small steps to economic reform however outcomes at this stage are unknown. Suspect debt figures are being released highlighting question marks surrounding the banking sector, particularly the ‘shadow banking’ sector creating headlines about a credit collapse in China.

So what should the Singaporean Investor do?

There are many unknowns, many question marks, and much more politically-driven volatility ahead – the most important take-away for the investor is to remain alert – to INVEST WITH BOTH EYES OPEN.

PLEASE NOTE: IPP Financial Advisers Pte Ltd is a licensed Financial Adviser and neither the company, nor its representatives are tax advisers. Any reference to tax, in any jurisdiction, is sourced from third party sources, which are deemed to be reliable and accurate at time of print, and professional tax advice should always be sought independently.

Any reference to any investment, fund or product should be read in conjunction with the prospectus/brochure/factsheet. Investments can rise and fall and past performance is not an indication of future performance.