Economy

Economy: Sit tight because its going to be a wild 2016
Investors are in for a roller-coaster ride in 2016 if the the prognosis of the world economy by economists at the World Economic Forum in Davos is anything to go by.

This comes as global equity markets reel from a steep selloff since the beginning of the year. The concerns among the bears include:
1) Economic slowdown in China having a knock-on effect on the rest of the world
2) Plunging commodity prices
3) High levels of corporate USD debt in emerging economies at a time when USD is strengthening, which may lead to widespread defaults
4) Disruptive technological innovations, which are displacing workers and changing the economic landscape

While on its own, each of the above problems would not cause a collapse, the combination of all the issues, taken in totality, could trigger a global crisis.

Adding to the gloomier outlook, the IMF trimmed 0.2ppt off its previous global growth forecasts to 3.4% in 2016 and 3.6% for 2017, marking its third cut in less than a year.

There were, however, voices of optimism with some economists pointing to:
1) Still healthy real GDP growth of 6.3% in 2016 given the much higher base now compared to the past
2) Economies have been given enough buffer time to prepare for rising US interest rates
3) The world economy is now more resilient due to other growth engines such as India

With the global risk-off sentiment likely to persist in the near term, investors can look towards safe haven assets or counters with healthy balance sheets and cash flows that would provide a dividend shelter during these times of volatility.

Safe haven currencies such as the USD, and the JPY are expected to appreciate in view of the current equity upheaval, with precious metal assets such as gold and silver seeing a reverse to their previous downtrends.

Dividend plays currently in the Market Insight Yield portfolio include:
1) UMS (Indicative yield: 9.9%)
2) OUE Hospitality Trust (9.2%)
3) China Merchants Holdings Pacific (8.4%)
4) Mapletree Greater China Commercial Trust (8.2%)
5) M1 (6.4%)
6) Venture (6.2%)
7) Fortune REIT (6%)
8. Singtel (5.1%)