SINGAPORE (Jan 23): Technological disruption used to be feared but in today’s context, unpredictable politics is more worrisome. Already, world geopolitics, in the two decades after Sept 11, 2001, has faced plenty of uncertainty. But with US president Donald Trump’s blatant disregard for norms of behaviour, the level of volatility has only gotten worse.
The US Federal Reserve, for decades, has held its head high as an independent institution whose unwavering focus was the economy. As recent decisions have shown, the US Fed is susceptible to pressures from the stock markets as well. The knock-on impact will be far and wide.
There has been a significant shift to green energy but the fear of oil shocks – given birth two generations ago – is now back in vogue. Paul Donovan, chief economist at UBS, notes that the 1973 oil shock was such a big event it has led to “biased” thinking about oil ever since even though “oil matters less than it did 45 years ago or even 10 years ago”.
While higher oil prices might not necessarily cause inflation, it might very well raise expectations of inflation. “Consumers do not think about inflation the way economists think about inflation. In the unlikely event that oil prices do remain high, investors should watch wages a little more carefully,” says Donovan.
Meanwhile, US markets, fuelled by cheap credit, have surged for the 11th straight year to hit record highs. “This has been the ‘most unloved’ bull as persistent investor scepticism has led to portfolios staying under-invested,” says Hou Wey Fook, chief investment officer at DBS. “Should the market stay resilient, portfolios that are sitting on excess cash levels may have little choice but to get back in,” he adds.
Two psychological factors come into play. First, is Fomo or “fear of missing out”. The second is Tina or “there is no alternative”. With negative bond yields getting more common, the stock market, compared to other asset classes, is the place to be. “Barring a full-blown trade war – which is not our base-case scenario – both Fomo and Tina will support equities,” says Hou.
Amid this backdrop, The Edge Singapore has picked 10 stocks from outside Singapore. These are the ones we think will deliver handsome returns over the coming year, and more. These 10 stocks are companies from different industries, ranging from consumer electronics to funeral services. They are listed on different exchanges: Australia, US, Hong Kong and Japan and they should appeal to investors with a range of profiles — from yield seekers and Benjamin Graham fans to those chasing after growth stocks.
Among our picks is leading games publisher Electronic Arts which has over the years created immensely-popular titles such as Fifa, The Sims and Command and Conquer. Its new business model now emphasises on recurring income.
Facebook, a growth stock that needs no further introduction, looks set to enjoy further growth as the network effect takes tighter hold, drawing users and advertisers alike into the world’s most popular social network.
See: 10 global picks: Facebook
We have also picked a few stocks in property, infrastructure and construction. For example, we like Hainan Meilan International Airport. Its previous association with debt-laden China conglomerate, the HNA Group, has pushed valuations down to levels that cannot be ignored.
See: 10 global picks: Hainan Meilan International Airport
Australia-listed Harvey Norman, a household name in the retail trade, may not be in the radar of investors. However, earnings are steady and valuations are low. And its yield is too attractive to ignore.
See: 10 global picks: Harvey Norman Holdings
Intuitive Surgical is acknowledged as a pioneer in robotic surgery technology with a huge installed base which means plenty of earnings visibility from its recurring customers. Much has been written about the fourth industrial revolution, robotics and robots. Isra Vision is a proxy play for that robotic future.
See: 10 global picks: Intuitive Surgical Inc, and 10 global picks: Isra Vision
Kier Group is a UK construction company and while there are concerns over Brexit, this is seen as a turnaround story. Like they say, death and taxes are the two certainties in life — even when the best healthcare is provided. For a sure bet on long-term prospects, look nowhere else than San Holdings, a Japan-listed funeral services provider, which is a leading player of its kind in a market which boasts the world's oldest population.
See: 10 global picks: Kier Group, and 10 global picks: San Holdings
Hong Kong-listed hotel chain Shangri-La Asia suffered from a selldown because of the protests in Hong Kong, where it books 10% of its revenue. However, its sprawling portfolio of hotels have yet to be revalued to current levels and there is the likelihood of value to be unlocked.
See: 10 global picks: Shangri-La Asia
Finally, we have Turtle Beach, a San Diego-based designer and maker of gaming headsets, which is riding on the growing popularity of this activity. No longer is gaming seen as a peripheral hobby, it is now accepted as a mainstream sport.
See: 10 global picks: Turtle Beach
