TAN SU SHAN
DBS Bank group head of consumer banking & wealth management
Q What were the best and worst things that happened to you (financially) this year?
A I've had a decent year financially. Following the DBS Wealth Management investment strategy, I have generally maintained an overweight call on developed-market equities, although I took some weight off US and Japan to neutral weight in the second half of the year, keeping Europe overweight throughout through some funds and ETFs (exchange-traded funds). Performances have been decent enough, although nothing to shout about.
There were some marked-to-market losses on my bond portfolio, but as I am relatively comfortable with the quality of the corporate credits in my portfolio, I am staying the course and riding this downwave as corporate spreads widen and rates rise.
Q How has 2015 been for your industry?
A Overall, the banking industry globally has suffered from the financial headwinds in 2015, though some have weathered the storm better than others. The global banking sector has underperformed by 7.2 per cent, compared with the global market indexes in the past year.
The economy and markets in 2015 have been volatile due to the mid-year Chinese stock market crash, the lower price of commodities, uncertainty on when the US Federal Reserve will hike rates and the European Central Bank (ECB)'s attempt at reviving the euro zone.
Consumer and investor confidence has also been hurt. But the emerging wealth and demand for wealth creation in Asia have continued to drive demand for wealth management services and so the secular growth trend remains intact despite some cyclical headwinds.
The wealth management business continues to grow steadily though we have been asking clients to stay cautious and vigilant and to keep their powder dry for a while.
Digital has been another of the key themes in 2015. Banks like DBS have worked hard to stay ahead of digital innovation and focused on improving the customer experience. This innovation, coupled with insights from data analytics and continued development of our mobile capabilities, has led to an improvement in both the customer and banker experience.
Q How do you see 2016 panning out?
A 2016 will continue to be tough. The sooner investors accept that, the sooner they can prepare for what is to come.
It will likely be the most volatile year for risk assets since 2011, when markets were shaken by the euro debt crisis and Washington's debt-ceiling brinksmanship.
The bulls will argue that interest rates will still be historically very low, even with modest rate hikes by the Fed. Flowing from that, equity earnings yields will still be much higher than government bond yields in most markets.
But I am wary as the global economy continues to slow. Many markets are in corporate earnings recessions, even though the economies continue to grow. Emerging markets and Asia ex-Japan have been in earnings recessions for some time now and the US is just entering one.
Valuations in developed markets are no longer cheap. So there will be some very strong push and pull forces at work in 2016.
My best guess is equities will remain supported in the early part of the year. The Fed will hike rates and the world will not come to an end.
Meanwhile, the Bank of Japan and the ECB will continue to print money at a furious pace, keeping rates at zero to negative. And investors are already starting to talk about simultaneous fiscal and monetary expansion to break the drag of deflation. But corporate earnings contractions will pull stocks in the other direction - down.
On the fixed-income front, the bond market (especially the SGD one) suffered some marked-to-market losses. If you remain convinced on the fundamentals of the bond market, you should stay the course. I would also advise to diversify into bond funds that pay a regular dividend if you don't want to do the credit due diligence yourself.
Q What is one piece of financial advice you would give to retail investors, looking ahead in 2016?
A If you are an active investor, stay close to the markets, read the news to stay informed or have regular contact with investment advisers.
If you are not, then start looking to invest in diversified mutual funds or ETFs when the markets do correct.
If you have longer-term goals, which are often non-negotiable - for example, retirement - set up saving plans or invest in insurance products such as endowment annuity plans which are longer term and focused on providing a stable stream of income during retirement.
A combination of the three investment strategies can be considered for different pockets of your wealth.