“Morningstar ETF Intelligence 2011” for Singapore was held on 16 September 2011 at the Marina Bay Sands. The event was well attended, and included more than 100 delegates. The two guest speakers featured at the event were Chief Economist Richard Jerram from Bank of Singapore and John Gabriel, Morningstar ETF strategist.
Richard Jerram commenced his presentation by giving an overview of global growth trends. From his perspective, developed economies have been sluggish and lack the necessary policy tools to combat the issue. In contrast, many developing economies in Asia can rely on a wide array of policy tools to address decelerating growth. He opined that this unique confluence of factors is likely to lead to rapid global growth driven by Asian economies, but with more risks than usual.
Elaborating on some of the issues overhanging the different economies, his key concerns are: 1) an eventual sovereign default by some of the troubled European Union members; 2) oil prices are likely to remain volatile given the rapid global growth and unstable MENA politics; 3) the uncertain effects of the experimental QE2 policy; 4) persistent risk of distortions arising from varying levels of liquidity and bubbles; and 5) overheating of Asian economies.
Expressing cautious optimism, he expects Asia to propel future global growth but warns of an unbalanced recovery fraught with uncertainty. A double-dip scenario stemming from the US is unlikely, but G7 nations will continue to experience slow growth, leading to low interest rate environment and a weakening of developed currencies. In his opinion, the recent slowdown may have provided a brief reprieve against inflation.
Richard Jerram was then followed by Morningstar’s John Gabriel who shared his views on the latest development and investment strategies in ETF space. He pointed out some of the factors that led to its growth and six critical areas that investors should consider when investing in ETF products namely: 1) the investment thesis; 2) suitability and risk of the product; 3) alternatives available in the market; 4) the underlying fundamentals; 5) its role in the portfolio; 6) and other structural and operational factors such as liquidity, taxation and tracking error et cetera.
He also took the opportunity to caution investors against some of the common pitfalls when assessing ETFs, and emphasized the importance of recognizing counterparty risks that may arise with different structures. John then went on to discuss the numerous applications for ETFs including its use as a tool for transition management, expressing precise investment views at the tactical asset allocation level, hedging away portfolio risks and gaining exposure to narrow segments of the market.
To wrap up the event, Anthony Chan, Director of Blackrock iShares Asian Research and Investment Advisory, hosted a panel session which included Richard Jerram and John Gabriel. The panel was discussed various macroeconomic issues globally and the opportunities these might bring for investors. As the discussion went on, there was consensus that gold remains viable investment over the long term, but may face short term headwinds amidst market volatility. Other possible investment ideas which were discussed included Asian debt, particularly that of emerging countries with structural growth stories.
When asked about the untimely scandal at UBS regarding ETFs, the panel agreed that such isolated incident is unlikely to affect the overall integrity of such products. They also suggested cross listings of ETFs in Asia would jumpstart its acceptance as it would expand the investor base and provide more liquidity. Finally, regarding the outlook of Singapore, Richard Jerram believes that “valuations are attractive” at the moment.
With Singapore as the last stop, we are pleased to announce that the series of events for Asia has come to a successful close. We take the opportunity to thank all investors for their continued support, and are looking forward to organize more events in future! For more updates and interviews, stay tuned to Morningstar sites and our ETF center as we bring you the latest coverage!
For presentation slides, please click here.