Singapore bank DBS intends to add defence-sector-related funds to its shelves and has made other changes to its product focus list following Donald Trump’s victory in last week's US presidential election.
Given Trump’s plan to increase military spending, the sector will provide good investment opportunities, said Frank Lee, acting chief investment officer for North Asia at DBS.
The firm, which last month agreed to buy ANZ’s Asian private banking arm, has no defence-related funds on its platform. In fact, there are not many such products available in Hong Kong, Lee told AsianInvestor.
Such funds cover the manufacturing and sales of weapons and military technology, and investors are tipped to focus more on the sector.
Despite the sell-off in Asian and European stocks on November 9, the defence sector was buoyant. BAE Systems, the UK’s largest arms supplier, has gained around 9% since close on November 8, while French defence-electronics firm Thales is up 8% over the same period, as of close yesterday.
Infrastructure hot, sovereign bonds not
Meanwhile, the Singapore bank has made changes to its funds focus list in Hong Kong; that is, the range of funds that it recommends to clients.
In October it added infrastructure-related products to the list; those that invest in utilities, developers, natural resources and US corporate bonds. Upgrading infrastructure was core to the pitches of both Trump and Democrat candidate Hillary Clinton.
Trump’s comments during the election campaign suggested that US infrastructure would be a beneficiary to the tune of $1 trillion over the next five years if he were elected, said Lee. This will boost related sectors, such as industrial metals, cement, energy, utility and construction companies, he added.
“For the medium term, this can suppress the unemployment rate and push up inflation and GDP, which would benefit the US economy all around,” he noted.
That said, DBS has taken US sovereign bond products off its focus list because of a potential US rate hike and widespread expectations that inflation is set to rise, but it retains high-yield corporate bond products in the recommended range.
Other wealth managers, such as China’s Noah and Swiss firm UBP, have argued that alternatives generally – and notably hedge funds – were worthy of consideration in light of the expected uncertainty and volatility in global markets.
As for how DBS’s clients have reacted to the election results, Lee said the market sell-off following Trump’s shock victory was short-lived. “Most of our clients maintained the status quo, except for the nimble investors, who buy on dips in Hong Kong equities.”
In light of widespread uncertainty – related not only to Trump’s win, but also to Brexit, the upcoming Italian constitutional referendum and a potential US rate hike in December – clients have grown reluctant to change their portfolio or have become more conservative and risk-averse, said Lee.