4Q19 Outlook: Ride the Wave

DBS CIO Hou Wey Fook shares how to generate positive returns in a world of zero to negative yields
Chief Investment Office27 Sep 2019
Photo credit: AFP Photo

Welcome to the final quarter of 2019. In 3Q19’s CIO Insights, we said the world was changing, therefore the approach to investing would be to ride the wave of this changing world.

In recent months, we saw the resumption of policy easing by global central banks. The European Central Bank cut its deposit rate from -0.4% to a new record low of -0.5%, and the Federal Reserve cut rates for the second time this year. The ultra-easy monetary policy environment we are in has resulted in the amount of negative-yielding bonds hitting an unprecedented level of 25% of the world’s bond market capitalisation.

As a result of near-zero to negative cash and bond yields today, the pertinent question to ask is – where will the pool of global savings head to, in order to generate a positive return?

We argue that institutional funds – the likes of sovereign wealth, pension, insurance, and endowment portfolios – have little choice but to turn to equities. Barring a full-blown trade war, this prospective rotation in asset classes is one of the principal reasons why we stay constructive on equities.

We continue to advocate a Barbell Strategy for your portfolio. This involves building Overweight positions in two areas. First, income-generating assets and second, equities that ride on secular growth trends of a changing world. On income assets, add dividend-yielding equities which will become the new “bond proxies”. On growth assets, stay invested in winners of the ageing, digitalisation, and sustainability trends.

In this issue, we show why gold must have a place in your portfolio, and we introduce Europe oil majors and Europe banks’ AT1s as attractive dividend plays. We also include a feature on Vietnam, Asia’s rising star.

Do enjoy the read!

Hou Wey Fook, CFA

Chief Investment Officer

Click here to read the full 4Q19 Outlook report.


This information herein is published by DBS Bank Ltd. (“DBS Bank”) and is for information only.  This publication is intended for DBS Bank and its subsidiaries or affiliates (collectively “DBS”) and clients to whom it has been delivered and may not be reproduced, transmitted or communicated to any other person without the prior written permission of DBS Bank. 

This publication is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to you to subscribe to or to enter into any transaction as described, nor is it calculated to invite or permit the making of offers to the public to subscribe to or enter into any transaction for cash or other consideration and should not be viewed as such.

The information herein may be incomplete or condensed and it may not include a number of terms and provisions nor does it identify or define all or any of the risks associated to any actual transaction. Any terms, conditions and opinions contained herein may have been obtained from various sources and neither DBS nor any of their respective directors or employees (collectively the “DBS Group”) make any warranty, expressed or implied, as to its accuracy or completeness and thus assume no responsibility of it. The information herein may be subject to further revision, verification and updating and DBS Group undertakes no responsibility thereof.

All figures and amounts stated are for illustration purposes only and shall not bind DBS Group. This publication does not have regard to the specific investment objectives, financial situation or particular needs of any specific person. Before entering into any transaction to purchase any product mentioned in this publication, you should take steps to ensure that you understand the transaction and has made an independent assessment of the appropriateness of the transaction in light of your own objectives and circumstances. In particular, you should read all the relevant documentation pertaining to the product and may wish to seek advice from a financial or other professional adviser or make such independent investigations as you consider necessary or appropriate for such purposes. If you choose not to do so, you should consider carefully whether any product mentioned in this publication is suitable for you.  DBS Group does not act as an adviser and assumes no fiduciary responsibility or liability for any consequences, financial or otherwise, arising from any arrangement or entrance into any transaction in reliance on the information contained herein.  In order to build your own independent analysis of any transaction and its consequences, you should consult your own independent financial, accounting, tax, legal or other competent professional advisors as you deem appropriate to ensure that any assessment you make is suitable for you in light of your own financial, accounting, tax, and legal constraints and objectives without relying in any way on DBS Group or any position which DBS Group might have expressed in this document or orally to you in the discussion.

If this publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of the Information, which may arise as a result of electronic transmission. If verification is required, please request for a hard-copy version.

This publication is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Singapore: This publication is distributed by DBS Bank Ltd (Company Regn. No. 196800306E) ("DBS") which is an Exempt Financial Adviser as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore (the "MAS").