A key architect of the compulsory retirement savings system lauds its many achievements, stretching from the national economy to the individual. Where it’s double faulting is in serving members – and it needs to be addressed promptly.
With performance and diversification driving demand, these funds are expected to experience four-fold global growth over the next decade to nearly $AU65 trillion.
Asia to rise above the rest in COVID aftermath
Asian Pacific nations have done so well during the battle against COVID-19 compared with their western peers that they have “turned the corner” in the evolution of the region, according to a leading academic, Professor Kishore Mahbubani.
He told a regional investor webinar from Singapore last week (November 19), which was organised by Amundi Asset Management and Bloomberg, that psychologically, as a result of COVID and on top of trade and political tensions, the Asia Pacific had realised it needed to rely on itself for sustainable growth.
“We can’t look to Europe and the US anymore,” he said. “In a sense, in 2020 we have turned a corner in the evolution of this region.”
Professor Mahbubani, a former diplomat, is a distinguished fellow at the Asia Research Institute and the National University of Singapore. He said that China had unnecessarily alienated the US business sector which had championed the country’s cause to boost commerce. China realised now that it could not rely on exports for continued growth and had to boost domestic consumption.
He was bullish on the prospects for emerging markets, credit and some equity markets, he said, although there were risks, too. “The [western share] markets are pricing a ‘glass half full’, but they need to take a step back and do a proper risk analysis.”
Monica Defend, Amundi’s global head of group research, said the firm’s key assumptions for its central scenario on the 2021 outlook were that an effective vaccine would be developed and distributed in the second half of the year, the market would see an even recovery, there will be sequences of selective lockdowns, and government intervention will shift from relief to boosting the economy.
She said that some regions, such as Europe, faced more execution risk in the recovery due to the impact of COVID there. Amundi is the largest European-based funds manager, with about €1.4 trillion (A$2.3 trillion) under management globally. For 2021, Amundi is predicting:
. interest rates will stay low
. inflation will remain low although there may be some spikes, such as with oil prices
. company earnings per share will recover globally, and
. real GDP will recover with China the best market “to look through for the next few months”.
“You need to be selective and you need to be protective,” Defend said. “There are some safe-haven asset classes. Gold is an example because there is a strong relationship between gold and balance sheet expansion on the central banks’ side.”
Asked whether there would be a return to value versus growth in investment styles – value having languished over about 10 years – she said: “That’s trillion-dollar question that every investor wants to know… In the short term there may be some delay in the process of rotation from growth to value. But it’s important to pay attention to the preferences of Asian countries.”
