Editorial Board Insights: Song Sheng Harn 2023 – Fund Selector Asia

Song Sheng: I think volatility is a natural part of the global financial landscape and staying informed and cautious can actually help investors to navigate these fluctuations. The first half of 2023 has been very volatile, yet a very strong one for equity markets. Investors have had to ride through a banking crisis, the possibility of recession, US debt ceiling issues, sticky inflation, geopolitical uncertainty, to name just a few. And yet, despite all these issues, all the major stock markets actually recorded positive returns, led by the US market and in particular the mega-cap stocks.

And in our view, the strong performance in equity markets rest on two key pillars. First is disinflation and a soft lending in the US economy. In many developed economies, inflation actually peaked around middle to end of 2022 and has since come off from their highs. However, since the inflation data remains above their targets, major central banks continue to be in an inflation-fighting mode even though the global economy has slowed. We expect further disinflation due to downward pressures in both cost push as well as demand pull inflation.

And the second reason is the absence of a hard landing as the health of the economy impacts corporate earnings. In the US, for example, GDP growth, labour market, consumer spending and even housing demand have continued to hold up despite the Fed’s effort to tighten financial conditions. And I think recession worries are likely to carry over into the remaining part of the year and even into 2024.

While the banking crisis in March looks over, the issues of the smaller regional US banks remain. This comes from their exposure to the US commercial real estate sector and the high interest rate and high liquidity environment will continue to create headwinds for these smaller US banks. Also, the delayed effects of monetary tightening and tighter credit availability will still dampen economic growth. That said, due to the strong labour market which supported consumer spending, we have shifted our expectations of a mild US recession from the second half of 2023 over to 2024.

Song Sheng: This is a tough one. I think the optimism at the start of 2023 from China’s reopening has seemingly fizzled out with investors showing their displeasure via the weak performance in Chinese equities. The manufacturing and export sectors have been hit hard amid a global slowdown. Nevertheless, due to strong domestic consumption from reopening, I think China’s economic cyclical upturn is still

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 8: Decent Work and Economic Growth
• SDG 10: Reduced Inequalities
• SDG 12: Responsible Consumption and Production
• SDG 13: Climate Action
• SDG 16: Peace, Justice, and Strong Institutions

The issues discussed in the article are connected to these SDGs as they involve topics related to economic growth, income inequality, responsible consumption, climate action, and corruption.

2. What specific targets under those SDGs can be identified based on the article’s content?

• Target 8.1: Sustain per capita economic growth
• Target 10.1: Reduce income inequality
• Target 12.2: Achieve sustainable management and efficient use of natural resources
• Target 13.1: Strengthen resilience and adaptive capacity to climate-related hazards
• Target 16.5: Substantially reduce corruption and bribery in all their forms

The article’s content relates to these specific targets as it discusses the need for sustainable economic growth, reducing income inequality, responsible consumption of natural resources, addressing climate-related hazards, and reducing corruption.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

No indicators are mentioned or implied in the article that can be used to measure progress towards the identified targets. The article provides insights and analysis on various issues but does not provide specific data or indicators for measuring progress.

4. SDGs, Targets, and Indicators Table

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Source: fundselectorasia.com

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