Global growth could accelerate this year, fuelled by a wave of liquidity released by central banks and underpinned by a gradual return to normality as the Covid-19 vaccine roll-out gathers steam. But the US dollar will continue to weaken through 2021.
These were among the key findings of a survey last month of 58 professional fund managers done by the Investment Management Association of Singapore (IMAS).
The poll found that investment experts' economic outlook for 2021 was generally upbeat, potentially fuelling a "risk-on" appetite towards the market.
"Half our members see a sharp rebound in Japan, the US and Europe in 2021, while the other half expect moderate or lower growth," said IMAS' development committee head Rajeev Demelo.
"But on balance, our view is cautiously optimistic."
There was broad consensus, however, that the greenback will continue to weaken through the year, as monetary easing bias remains intact with Washington rolling out Covid-19 relief measures and increasing its fiscal spending. The greenback has been volatile in recent weeks.
IMAS has some 120 members comprising largely chief investment officers and chief executives of global fund management corporations with assets under management of some US$15 trillion (S$20 trillion) globally. The organisation forms a platform for education and discussion on topics of interest for investment managers.
A key finding of the IMAS 2021 Investment Managers' Outlook Survey was that environment, social and governance will become a significant driver of investments over the next three years.
Investment managers see emerging market equities, which have been under pressure during the pandemic-hit 2020, picking up strongly this year. This includes most South-east Asian and East Asian markets, which are already showing signs of recovery.
And within investment segments, the strongest upside potential is seen in the rotation towards energy, financials, commodities and cyclical industrials which were laggards during the past year. Transportation (read: airlines) is also expected to pick up.
Also, alternative investments in private equity funds, hedge funds and commodities will become more popular and attract increasing interest among investors this year, according to IMAS members.
Ironically, respondents appeared somewhat downbeat on the prospects for China's economic growth this year.
"One of the interesting aspects (of the survey) was that the team in Singapore and Hong Kong appeared quite cautious about prospects for China," said Mr Demelo. "Our view, at 7 per cent growth, was below the consensus of the IMF and private sector economists, who project China's growth at above 8 per cent."
Noting how China is phasing out some of its stimulus measures, fiscal and monetary, Mr Demelo said exports could moderate due to a stronger currency.
IMAS sees the relationship between the incoming Biden administration and China moving to a more even keel in the post-Trump era, although Mr Demelo said "no one seriously expects President (Joe) Biden to reverse policies in the near term".
Among the key risks to growth, as seen by investment managers, is a slower-than-expected roll-out of Covid-19 vaccines, and the "scarring effect" on economies arising from stubbornly higher unemployment and longer-term damage to output.
But all in all, a more sanguine economic and geopolitical environment awaits in 2021, if the survey is any guide.
