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COVER STORY will grow and it will continue to be a very exciting market,” says Crook. “With the continuous search for yield in this present market, alternative finance enables an investor to diversify their investment portfolio and risks and at the same time achieve good returns,” he adds.

Alternative finance enables investors to diversify their investment portfolio and risks

amongst institutional investors towards alternative finance is an indication that large financial companies will become more engaged in the sector going forward.” He reckons alternative finance is emerging as a mainstream option in Asia that addresses the rising entrepreneurial needs in the region. China, for example, has become the world’s largest peer-to-peer lending market by transaction volume with US$101.7b in 2015, accounting for almost 99% of the total volume in the AsiaPacific region. “Asia remains a lucrative market which is attracting alternative finance options from diverse parts of the world,” says Crook. “Meanwhile, the local market remains optimistic, and will sustain – if not increase – the demand for short-term loans; however it is to be seen what regulatory bodies will do to ensure the prolonged health of the lending space,” he adds. Despite Singapore being the wealthiest country in the region per capita, a recent study by Deloitte highlighted that 40% of local SMEs – which contributes to around 47% of the country’s GDP – didn’t have access to a bank loan. “Whilst SMEs are hungry for capital, banks are not willing to lend as quickly,” says Crook. “The immediate addressable opportunity currently stands at US$3.3t, compared to the already exploited early stage investing market of US$300b.” “Alternative finance is reaching a tipping point from which it will launch into a mainstream financing option and explode in growth rate and high value to become a foundation for global finance,” he adds. Crook reckons that 2017 will see an uptick of entrants in all countries across Southeast Asia, and alternative finance will be attractive for investors because it can help diversify their portfolio amidst these uncertain times. “Whether it’s accredited, institutional, or retail consumers, whether it’s trade, invoice trade financing, whether it’s SME lending, all segments of peer-to-peer

10. ETFs For investors that are looking to build a low-cost, broadly diversified portfolio, exchange-traded funds (ETFs) may be the simplest way to go, says James Martielli, head of portfolio review, Asia at Vanguard. “Many of these products are low cost, offer broad diversification, and are easily accessible with a brokerage account on an exchange,” he says. “As our founder John C. ‘Jack’ Bogle often said, instead of trying to find the needle in the haystack, just buy the whole haystack instead,” adds Martielli. Providing a more general investment strategy, he reckons that predicting which stock, sector, or currency will outperform is always a difficult task since markets are often surprising and unpredictable over the course of a short-term period like a year. But following four timeless principles – goals, balance, cost, and discipline – improves the chance for investment success. “First, start by aligning your asset allocation with your investment goals. As a rule of thumb, the longer your time horizon, the more you should be able to allocate to riskier assets like stocks,” explains Martielli. He says the next thing they do is encourage investors to maintain balance in their portfolio by having a diversified mix of stocks, sectors, countries, and asset classes. Martielli adds, “Costs is one of the few things in investing that you can control. The less you pay, the more of the investment return you keep.” “Finally, maintaining discipline is easy to say, but harder to do in practice,” stresses Martielli. Here is his advice to investors: “Do not be tempted to change your asset allocation if your investment goal or risk tolerance has not changed.”

We forecast continued depreciation of RMB against US$

Sources: Bloomberg, various news sources; annotated by Goldman Sachs Global Investment Research

SINGAPORE BUSINESS REVIEW | JANUARY 2017 33


Singapore Business Review (December 2016 - January 2017)