What a difference a year makes. This time last year, few could foresee the impact of the pandemic on economies, on markets and indeed on our daily existence. Fewer still could see the looming divergence – and the dichotomy – of surging markets and tanking economies. March 2020 presaged the start of a rally but few saw that coming either.
So here we are, more than a year into the Covid-19 induced crisis, and things are looking up; the light at the end of tunnel is shining brighter as we approach summer in the Northern Hemisphere. The vaccine rollout is gathering momentum and travel bubbles are forming.
For investors and their advisers, it was certainly a good year for their businesses. What will the landscape look like in the next 12 months? Well, pundits expect global emerging markets to regain their lustre while the beaten down small caps sector look promising too. Bonds look more challenging on the premise that an era of decade-low yields may be nearing its end and inflation may return.
And what of the tech sector? The tech elites will point to a future of undreamt possibilities (hence justifying the market froth). But there are others who recall the dot com mania two decades earlier and so take a more nuanced approach for their portfolios. Undeniably, though, the AI revolution is upon us. What is clear in the transition from the Old Economy to the New Economy – is that we are entering an era of winner-takes-all, which will pose new challenges to policy makers.
In the domain of fintech, digital currencies are now a hot button topic. Central bank digital currencies (CBDCs) are in the works but there are still many unknowns and challenges if and when these platforms make it to daylight. Will banks be finally disintermediated? Will power shift to investors?
For the fund management industry, the digital transition is gathering pace and it comes at a time of heightened consolidation globally; both cyclical and structural forces are at play so the next decade may look vastly different from the current one in terms of the market rankings of the top players. Some may well disappear. The old debate of active versus passive, for some, is no longer a debate.
Meanwhile, fund management centres in Asia-Pacific are raising their game to attract talent and capital. Tokyo is renewing efforts to stake its claim, currently led by the trio of Hong Kong, Singapore and Shanghai, the latter having risen through the ranks rather impressively in the past ten years. And judging by recent developments, expect to see much more impact in the Greater Bay Area.
And as we begin to move into the post-pandemic phase, we can look back with satisfaction at the progress that the industry has made in the past one year inspite of the extraordinary circumstances of the time. To those who have achieved outstanding success, our heartiest congratulations to all of you.
Tan Lee Hock
Founder and Publisher
Asia Asset Management