SINGAPORE (June 5): The world is in this very visible economic downturn, as the invisible Covid-19 continues to wreak havoc on lives and livelihoods. Stock markets have suffered breathtaking volatility, as optimistic investors have jumped right back after riding through the stomach-churning crash in March. Now, as US-China bickering over trade and politics resumes, obstacles to actual economic recovery loom large.

Amid this backdrop, should investors in Singapore sell more stocks, keep more cash, and wait for prices to tumble again before jumping in?

Many virus-hit economies have suffered the first shock of sudden lockdowns. With tentative, gradual easings, there are some green shoots. However, with geopolitical risks, much can happen. “It is an uncertain recovery,” says CIMB Private Banking economist Song Seng Wun. Analysts have been largely “flying blind” — they could only rely on what happened in the past one or two crises and make similar assumptions. “Where you get interesting is the next one, two reporting seasons,” says Song — that is when the market will have a better idea how this recession has hurt corporate earnings.

Song was speaking at a webinar on May 30, “Investing in the time of Covid-19”. The event was jointly organised by The Edge Singapore and EdgeProp Singapore, and sponsored by CapitaLand. Other speakers were Terence Wong, CEO of Azure Capital; Geoff Howie, Singapore Exchange’s (SGX) market strategist; and Alice Tan, senior director, research and consulting at Edmund Tie.

To the question of what investors should do, Song’s candid response is: “I really don’t know.” He says: “Since we are in unprecedented territory, we really don’t know how things are going to hit individual sectors and companies. Save some bullets. If you are a trader, trade, but if you are an ah peh like me, be conservative.”

Dr Boaz Boon, moderator for the panel discussion, summed up the individual presentations with three ‘P’s: pessimism, protection and prayer.

Wong is especially worried about how ties between the two superpowers will pan out. “US-China tensions will play a major role, but haven’t yet. That puzzles me,” he says.

There had been recent worrisome developments. Beijing imposed new security laws on Hong Kong, and the US has responded by no longer deeming Hong Kong autonomous. “Hong Kong will react negatively; it is the bellwether of Asian markets,” says Wong.

With the evident contraction in economic activities, he laments that analysts have been slow in reducing earnings estimates. “Earnings forecasts are still too glowing for its own good,” says Wong. He expects better clarity in the coming quarter. “The cuts may be drastic, and could bring markets lower,” says Wong.

SGX’s Howie is more optimistic, though. “We have a lot going in the market. We are doing a good job here in Singapore. The GDP is down but there are the various booster budgets. We are definitely putting as much as we can through the economy,” he says, referring to the more than $90 billion total in government spending earmarked to help the country deal with the crisis.

Song warns that the government measures can only act as a cushion of sorts. Very much depends on whether the spread of the coronavirus can be sufficiently curbed so as to allow some semblance of normalcy to resume. “If people cannot travel, if external conditions remain vulnerable because of politics, [US President Donald] Trump, or second, third wave of infections, ultimately all these will impact Singapore,” he says.

In the meantime, even with the measures, businesses have started to fail, which will inevitably lead to higher unemployment. The last peak unemployment rate was 6% and if that same level is reached, it means more than 100,000 jobs will be axed.

“The next three, six months will be very critical. If people are shuttering after turning the lights on this weekend, if jobless numbers go up, then perhaps measures can be finetuned again. It is about containing damage. It is about jobs — your job, my job, my friend’s job,” says Song. “It all ties back to confidence and morale, whether the money in pocket is coming in regularly, or at smaller amounts.”

While Wong agrees that stock markets are forward-looking, the recent recovery might have been too soon. A bigger disconnect between markets and economies might happen later this year. “The geopolitical crisis has not been fully appreciated by the market. So, there’s a good chance that the market might visit a new low,” he says.

Boon, the moderator, asked what an investor should do with $100,000 today. Song says there are plenty of investment choices that investors can consider here in Singapore. However, he warns them not to “over-commit” at any point in time. “You got to sit through — this is the start of a fairly long haul,” he says.

Howie’s advice is for the investor to apply dollar-cost averaging, and invest in equal amounts over a regular schedule. “If you are unsure what the future holds, go in a bit at a time, spread it out.”

Wong, citing an oft-heard quip — “don’t waste a good crisis” — believes there is a good chance that markets will go down more. “This crisis is as big as it gets,” he reasons. There is no hurry now, but as the market comes off, it is time to look into good-quality stocks, he says. “When the bounce comes, it is going to be quite strong.”

Regardless of investment decisions, Edmund Tie’s Tan probably speaks for the business community here that is starting to get weary with the lockdown, and are revving to deal with this crisis in the way they know best. “Will virtual meetings help to do business, help to close deals? In the past two months, we have maintained communications, but will this lead to transactions? We are all dying to do business again,” she says.