SINGAPORE (Apr 30): Recent weeks have seen investors becoming more nervous. Bond, equity and currency markets have turned more volatile. It appears that three sets of risks have conspired to hurt business and investor sentiment — signs of slower global growth, the ill-tempered exchanges between the US and China over trade and -geopolitical concerns.

But have the risks really escalated enough to warrant a more pessimistic view of the global environment? If one looks closely at each of the concerns above, the risks in most cases seem contained in the short term. Our view is that, first, the cyclical upswing in the global economy is not only set to continue after a temporary deceleration, but could even surprise on the upside. Second, we believe that, while there are real risks to trade in the long term, the near-term risks are less alarming as there is a strong chance that the US and China will sort out their differences. Finally, on geopolitical risks, we find that risks in Asia have actually diminished — but flashpoints in the Middle East look to be far more dangerous than many realise.

Global economy: Upside surprises still possible
Optimism about the strength of the global economic cycle has cooled recently. Purchasing manager surveys showed some loss of economic momentum across the globe. Data in the US suggests that economic growth in the first quarter was relatively subdued at 2% or just below. In Europe, there are mounting concerns that the strong recovery seen in 2017 is fading rather more quickly than expected.

To continue reading,

Sign in to access this Premium article.

Subscription entitlements:

Less than $9 per month
3 Simultaneous logins across all devices
Unlimited access to latest and premium articles
Bonus unlimited access to online articles and virtual newspaper on The Edge Malaysia (single login)

Stay updated with Singapore corporate news stories for FREE

Follow our Telegram | Facebook