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CIO Insights 1Q25: Game Changers

The Value in Bitcoin Volatility

Trump 2.0 – Winners & Losers

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The ASEAN Portfolio

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Our discussions with UK and Europe-based clients last week focused on near-and-medium term risks. Investors are underweight Asia now, but are ready to deploy capital in early 2025.

Macro Insights Weekly: Notes from UK/Europe

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<p><span style="font-family: arial, helvetica, sans-serif;"><span style="color: #ba372a;"><strong><u>Commentary: </u></strong></span><strong><u><span style="color: #ba372a;">Notes from UK/Europe</span><br /><br /></u></strong></span><span style="font-family: arial, helvetica, sans-serif;">Our discussions with UK and Europe-based clients last week focused on near-term opportunities and medium-term risks. Largely, it has been a good year for asset managers in both DM and EM assets, although trades have been highly correlated and returns have been biased toward USD assets. Heading into the end of 2024 and looking ahead to the US presidential inauguration, asset managers&rsquo; positioning came across to us as rather uniform.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">No one is inclined for fight &ldquo;Trump trades&rdquo; at this juncture, remaining long USD, long gold, long cryptos, long US stocks, and short US rates duration. Those with exposures to EM and DM corporate credit are comfortable with hard currency exposure, although the highly compressed spreads cast doubt on room for further rally. As for local currency credit, especially those from Asia, we found investors underweight substantially.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">The rationale is straightforward&mdash;firstly, on stocks, US economic performance remains strong, pointing to sustained earnings growth for companies and income growth for individuals. Valuations are elevated by all measures, but appear to be sustainable for now, given investor interest. Secondly, on the USD, pricing in any type of tariff imposed by the incoming Trump administration would entail selling EM currencies against the US dollar, a trend that has accentuated over the past month. Thirdly, on bonds, risks of a trough in inflation and tax-cut fuelled fiscal expansion have manifested in the short-duration trade. Finally, on credit, likelihood of higher-for-longer have yet to dent confidence of corporate and household borrowers.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">Against this backdrop, the Asia underweight trade also makes sense. Uncertainty around the Trump tariffs will get this trade going through 1Q25, in our view.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">We picked up considerable concerns on Europe, from geopolitics (rise of the far right, government instability, Russia-Ukraine war, relationship with the US) to economics (future of the auto industry in the face of fierce competition from China, substantial need for fiscal reform, underwhelming productivity growth) to social (immigration policy). Investors find scant opportunities in the continent, pushing them toward overweight US assets.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;"><strong>Looking past 1Q25, we found resonance with the argument that wide ranging tactical opportunities could emerge</strong>. There is a limit to how far the current frenzy around US stocks can last. European equities, although shunned presently, could come back into play next year given their cheap valuations. Both USD and US dollar assets could undergo a correction after the US presidential inauguration as inconsistencies in Trump&rsquo;s economic model (tariffs plus weak USD, tax cut plus fiscal consolidation, immigration crackdown plus disinflation) are scrutinised by the market.&nbsp;&nbsp;&nbsp;<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">Similar tactical trades could come in vogue for Asia. While right now little differentiation is being made to risks faced by North Asian versus Southeast Asian economies, China versus India, exporters versus local demand players, such considerations will make sense from 2Q25 onward, in our view.&nbsp; We sensed substantial interest in Asian hard currency assets, including those from China. We look forward to the flows next year.&nbsp;<br /><br /><br /></span><span style="font-size: 12pt;"><span style="font-family: arial, helvetica, sans-serif;">To read the full report, click here to <strong><a href="/pdfController.page?pdfpath=/content/article/pdf/AIO/122024/241209_insights_weekly.pdf">Download the PDF</a></strong>.</span></span></p>
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<h4 class="name">Taimur Baig, Ph.D.</h4>
<h5 class="designation">Chief Economist - Global</h5>
<a href="mailto:taimurbaig@dbs.com">taimurbaig@dbs.com</a></div>
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<div class="image"><img src="/iwov-resources/aics/images/group_research_staff/Nathan_profile.jpg" alt=" " /></div>
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<h4 class="name">Nathan Chow 周洪禮</h4>
<h5 class="designation">Senior Economist and Strategist - China &amp; Hong Kong 高級經濟學家及策略師 - 中國及香港</h5>
<a href="mailto:nathanchow@dbs.com">nathanchow@dbs.com</a></div>
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<br /><br />Subscribe&nbsp;<a href="mailto:groupresc@dbs.com?subject=Subscribe_to_Economics_Macro_Strategy_research_materials">here</a>&nbsp;to receive our economics &amp; macro strategy materials.<br />To unsubscribe, please click&nbsp;<a href="mailto:groupresc@dbs.com?subject=Unsubscribe_to_Economics_Macro_Strategy_research_materials">here</a>.</div>
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Southeast Asia has become attractive to investors lately, but so have other emerging economies. Recognising key headwinds, we still see room for substantial regional prosperity in the decade ahead.

Navigating High Winds: Southeast Asia Outlook 2024 – 34

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<p><span style="font-family: arial, helvetica, sans-serif;">Southeast Asia has grown despite headwinds. &nbsp;Over the last three decades, the region withstood shocks from the Asian financial crisis, the SARS pandemic, a global financial crisis, and the Covid-19 pandemic. And it stayed the course.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">Southeast Asia grew, even as the China miracle siphoned manufacturing investment and jobs away from the region.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">In recent years, Southeast Asia has become more attractive to investors, but so have India, Mexico, and Eastern European countries.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">This is the right moment for Southeast Asia to leverage its newly improved investment climate and well-established, dynamic sectors.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">Much of the world is bracing for lower growth because of higher interest rates, unsustainable government spending levels, trade protectionism, and the potential fallout from the US-China rivalry. But in Southeast Asia, tailwinds should prevail.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">Southeast Asia comprises of six major markets and a handful of smaller ones. While there are important links between markets and opportunities to pursue regional approaches, each country&rsquo;s potential must be addressed individually.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">While many economists focus on FDI as the key barometer for confidence in an economy, we assign substantial weight to domestic investment. Most Southeast Asian countries are seeing robust growth of domestic investment, which underscores local confidence in the region&rsquo;s growth prospects relative to alternatives.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">Effective government action will play a role in catalysing growth. The China model involves the state setting priorities and bending funding toward them. Execution occurs at the city and provincial levels through state-enabled &ldquo;hyper-competition.&rdquo; Entrepreneurism plays a critical role in fully realizing growth potential.<br /><br /></span><span style="font-family: arial, helvetica, sans-serif;">We say, let&rsquo;s unfurl the mainsails.<br /><br /></span><br /><span style="font-size: 12pt;"><span style="font-size: 10pt; font-family: arial, helvetica, sans-serif;">To read the full report, click here to&nbsp;<strong><a href="/pdfController.page?pdfpath=/content/article/pdf/AIO/082024/240801_insights_sea_outlook.pdf">Download the PDF</a></strong>.</span><br /></span></p>
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<h4 class="name"><span style="font-family: arial, helvetica, sans-serif;">Taimur Baig, Ph.D.</span></h4>
<h5 class="designation"><span style="font-family: arial, helvetica, sans-serif;">Chief Economist - Global</span></h5>
<span style="font-family: arial, helvetica, sans-serif;"><a href="mailto:taimurbaig@dbs.com">taimurbaig@dbs.com</a></span></div>
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<h4 class="name"><span style="font-family: arial, helvetica, sans-serif;">Radhika Rao</span></h4>
<h5 class="designation"><span style="font-family: arial, helvetica, sans-serif;">Senior Economist &ndash; Eurozone, India, Indonesia</span></h5>
<span style="font-family: arial, helvetica, sans-serif;"><a href="mailto:radhikarao@dbs.com">radhikarao@dbs.com</a></span></div>
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<h4 class="name"><span style="font-family: arial, helvetica, sans-serif;">Ma Tieying, CFA</span></h4>
<h5 class="designation"><span style="font-family: arial, helvetica, sans-serif;">Senior Economist - Japan, South Korea, &amp; Taiwan&nbsp;</span></h5>
<span style="font-family: arial, helvetica, sans-serif;"><a href="mailto:matieying@dbs.com">matieying@dbs.com</a></span></div>
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<h4 class="name"><span style="font-family: arial, helvetica, sans-serif;">Chua Han Teng, CFA</span></h4>
<h5 class="designation"><span style="font-family: arial, helvetica, sans-serif;">Economist - Asean</span></h5>
<span style="font-family: arial, helvetica, sans-serif;"><a href="mailto:hantengchua@dbs.com">hantengchua@dbs.com</a></span></div>
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US, Europe, Japan

The US is set to see a more crypto-friendly administration under Trump.

Crypto Digest: Pro-Crypto Shifts in Trump's Era

Webinar: Digital Assets Update 4Q24 

We take a look at the market frenzy across various crypto assets and assess their outlook in light of possible regulatory changes ahead.

Digital Assets Update 4Q24: Crypto frenzy

US: Fed meeting a non-event 

With Donald Trump&rsquo;s election as the 47th president of the US and the Senate shifting to a Republican majority, a few years of intensifying trade and tech war, and deficit spending lie ahead.

Trump win and the global macro narrative

Given the scope for significant regulatory change in the US following elections, crypto markets should see higher volatility into Nov as sentiment swings with election odds.

Crypto Digest: US politics’ influence on sentiment

Cryptocurrencies offer a new paradigm of decentralized, logic-driven money. Adoption is increasing, given its potential for new applications, but much remains uncertain.

Digital currencies: Perspectives and potential

With the US Fed kickstarting its rate cut cycle with a strong 50bp cut, the focus shifts to Japan and the Eurozone.

Japan & Eurozone: On their own beat

https://www.dbs.com.sg/treasures/aics/archive/index.page?geography=asia-ex-jp

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Singapore&rsquo;s growth prospects are bright despite a plethora of internal constraints and external uncertainties. What explains the economic resiliency of the city state?

Macro Insights Weekly: Resilient Singapore

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<p><span style="font-family: arial, helvetica, sans-serif;"><strong><u>Commentary: </u></strong><strong><u>Resilient Singapore<br /><br /></u></strong>Singapore&rsquo;s economy is poised to outperform in 2024 (DBS forecast: 3.8%), well above analysts&rsquo; expectations of around 2% a year ago. It has been a good year for Singapore&rsquo;s businesses; export demand has been strong, as have local tourism and events. Growth has been broad-based, with key sectors expanding.&nbsp;</span><br /><br /><span style="font-family: arial, helvetica, sans-serif;">In their 2025 Singapore outlook <a href="../112024/241129_insights_annual_outlook_singapore.xml">publication</a>, economist Chua Han Teng, and macro strategists Eugene Leow and Philip Wee, see the following key features in the coming year:</span></p>
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<li><span style="font-family: arial, helvetica, sans-serif;">Favourable growth prospects, barring unexpected significant global negative shocks. Real GDP to grow in line with potential at 2.8% in 2025.</span></li>
<li><span style="font-family: arial, helvetica, sans-serif;">A new dawn on the cards for the Johor-Singapore Special Economic Zone (JS-SEZ), with potential to add substantial value for businesses and workers.</span></li>
<li><span style="font-family: arial, helvetica, sans-serif;">Moderating inflation, moving closer to the pre-pandemic 2010-2019 average of ~2%.</span></li>
<li><span style="font-family: arial, helvetica, sans-serif;">Government&rsquo;s focus to be anchored by the Forward Singapore (Forward SG) agenda, with some fiscal room to balance long-term imperative with some near-term exigencies.</span></li>
<li><span style="font-family: arial, helvetica, sans-serif;">Some scope for the Monetary Authority of Singapore (MAS) to slightly reduce the appreciation pace of the SGD NEER policy band in 2025.</span></li>
<li><span style="font-family: arial, helvetica, sans-serif;">USD/SGD could push above 1.35 in the first half of 2025.</span></li>
<li><span style="font-family: arial, helvetica, sans-serif;">Downside to SGD rates will be constrained by a murkier US Fed cut path.</span></li>
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<p><br /><span style="font-family: arial, helvetica, sans-serif;">Singapore has faced numerous shocks in recent years, starting with the pandemic but then extending into post-pandemic inflation surge (The consumer price index has risen by 16.5% since the beginning of 2020), volatility in external demand and energy prices, increasing geopolitical tension, a tight labour market and related immigration matters, complications of managing surging capital inflows, and challenges of a frothy property market. And yet, the economy has chugged along, taking into stride cost of living concerns, tightening of monetary and macroprudential policies, and rising China-US tensions. After dipping in 2020, and despite the subsequent inflation surge, real per capita income (in purchasing power parity) has risen by nearly 11%.</span><br /><br /><span style="font-family: arial, helvetica, sans-serif;">What explains Singapore&rsquo;s resiliency? First, despite high costs, the economy attracts foreign investment because of world class infrastructure, logistics, human capital, public services, rule of law, and a business-friendly regulatory framework. Steady rise in brownfield investments in tech, energy, pharma, and hospitality attest to that. Second, investment-related policy foresight and stability signal commitment to investors with long-term horizon. Third, a proactive agenda on health, housing, and education for the population, and incentives for the next generation of tech and ideas, help maintain the quality of life, human capital, and competitiveness.</span><br /><br /><span style="font-family: arial, helvetica, sans-serif;">Finally, prudent fiscal and monetary policies have helped boost financial buffers, worth several hundred percent of GDP, to deal with crises, climate change, and tech disruptions. Cushions matter above all in a turbulent world.&nbsp;<br /></span><br /><br /><span style="font-size: 12pt;"><span style="font-family: arial, helvetica, sans-serif;">To read the full report, click here to&nbsp;<strong><a href="/pdfController.page?pdfpath=/content/article/pdf/AIO/122024/241202_insights_weekly.pdf">Download the PDF</a></strong>.</span></span></p>
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<div class="image"><img src="/iwov-resources/aics/images/group_research_staff/Taimur_profile.jpg" alt=" " /></div>
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<h4 class="name">Taimur Baig, Ph.D.</h4>
<h5 class="designation">Chief Economist - Global</h5>
<a href="mailto:taimurbaig@dbs.com">taimurbaig@dbs.com</a></div>
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<div class="image"><img src="/iwov-resources/aics/images/group_research_staff/WeiLiang_profile.jpg" alt=" " /></div>
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<h4 class="name">Chang Wei Liang</h4>
<h5 class="designation">FX &amp; Credit Strategist</h5>
<a href="mailto:weiliangchang@dbs.com">weiliangchang@dbs.com</a></div>
</div>
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<br /><br />Subscribe&nbsp;<a href="mailto:groupresc@dbs.com?subject=Subscribe_to_Economics_Macro_Strategy_research_materials">here</a>&nbsp;to receive our economics &amp; macro strategy materials.<br />To unsubscribe, please click&nbsp;<a href="mailto:groupresc@dbs.com?subject=Unsubscribe_to_Economics_Macro_Strategy_research_materials">here</a>.</div>
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Asia

The economy showed sign of stabilisation amid ongoing stimulus taking effect.

China: Initial signs of economic stabilization

Three strategic economic objectives for 2025 were outlined in the recently concluded Central Economic Work Conference (CEWC).

China Central Economic Work Conference and 3 objectives for 2025

Research Library

India&rsquo;s growth to end disappointing streak.

GDP Nowcast: India’s GDP growth likely to improve in 4Q 

2025 macroeconomic forecasts; Trump 2.0 risks; Five sectoral opportunities.

Taiwan 2025 Outlook: Trade risks and five opportunities 

Singapore&rsquo;s economic growth has gained momentum in 2H24.

Singapore: Solid growth but some uncertainties

Hong Kong's mixed outlook sees lower rates boosting lending, robust exports, but retail and property face headwinds amid geopolitical tensions, projected 2.5% GDP growth.

Hong Kong 2025 macro outlook: A cloudy weather

Asset Risks: Rising FX risk score 

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CIO Insights 1Q25: Game Changers

The Value in Bitcoin Volatility

Trump 2.0 – Winners & Losers

Credit: Soft-Landing For Now

The ASEAN Portfolio

CIO Industry Guide: November 2024

US, Europe, Japan

Macro Insights Weekly: Notes from UK/Europe

Navigating High Winds: Southeast Asia Outlook 2024 – 34

Crypto Digest: Pro-Crypto Shifts in Trump's Era

Webinar: Digital Assets Update 4Q24

Digital Assets Update 4Q24: Crypto frenzy

US: Fed meeting a non-event

Trump win and the global macro narrative

Crypto Digest: US politics’ influence on sentiment

Asia

Macro Insights Weekly: Resilient Singapore

Navigating High Winds: Southeast Asia Outlook 2024 – 34

China: Initial signs of economic stabilization

China Central Economic Work Conference and 3 objectives for 2025

Research Library

GDP Nowcast: India’s GDP growth likely to improve in 4Q

Taiwan 2025 Outlook: Trade risks and five opportunities

Singapore: Solid growth but some uncertainties

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