2019 went passed in a blink of an eye. As they say, when you are having fun, time flies. 2019 may not be a stellar year in most people’s books, but it has not been all that doom and gloom – it is certainly no where near the reminiscence of 2009 Financial Crisis. Rather 2019 has played out quite as I have predicted in my last year blog entry – a moderate soft landing (come on, 3ish% growth in this new normal isn’t something to moan about).

As our American friends finally realise that free markets and “Adam Smith” capitalism are almost never rational, timely intervention can help smooth out extreme volatility that can be detrimental and even destructive in our modern highly interconnected economy. And the biggest irony of it all, President Trump, despite all his nationalist rhetoric, has adopted “communist-style” trade measures. But he probably will never admit to that, just as we will never get to see his tax returns!

US-China trade war has certainly helped guide their respective over-heated economies back from the moon. In fact, many economists are forecasting this softness to continue into the new year 2020. The IMF’s October 2019 World Economic Outlook projected global growth at 3 per cent this year and 3.4 per cent in 2020 — 0.3 and 0.2 percentage points lower than our April forecast respectively. Global GDP growth are at their lowest since the 2009 Financial Crisis.

However, as business leaders and entrepreneurs, we must be optimists. As the saying goes, “The night is darkest just before dawn.” Let’s look at some of the positive developments –  1stly, the announcement of a “phase-one” trade deal between the US and China that will de-escalate trade tensions.

But one thing I would like to put my neck out for – all these trade barriers or trade tariffs put in these past few years will never be fully or completely be removed, at least not in the short to medium term (the next 2 – 3 years). This will be part of the “new normal” package. “Why?”, you may ask. It is an easy answer – money. The single one commodity that almost every human being is addicted to. It is simply hard to say “no” to more tax revenue especially when it is paid to you, not by your own tax residents, but by a foreign “competitor”!

Raising tax has always been a sensitive issue. And in some cases, raising tax has caused politician to even lose an election. Therefore, this trade war has not only allowed politicians to gain more tax revenue but also gain political capital by getting your “frienemy” to collect on your behalf. Furthermore, this tax scheme is targeted exactly at the “rich” who are exporting and enjoying the fruits of globalisation.

Moving on to next positivity – 2ndly, in the UK, the recent election results suggest that the worst of the Brexit uncertainty may be over. However, it can still be a hard slog ahead.

3rdly, despite months of street protests in Hong Kong, its recession has been largely contained and no sign of spreading regionally. (for numbers addicts – its GDP has fallen from 27% to that of China at its peak in 1993 to 2.95% in 2017)  

4th, in Indonesia, it successfully concluded its presidential election with incumbent Jokowi continuing into his 2nd and final term. Since the voting results finalised in May, there have been a significant pick up in trade and investment activities. This comes as no surprised as many of these investors waited till the sky cleared up before committing. While this pick up is just accumulated backlog been cleared now, we do expect economic activities to continue to pick up as Jokowi is able to embark more aggressively on his reforms. And as written before in my previous blogs, Indonesia stands out among many other emerging economies, with its low debt levels. As such, I am looking for Indonesia to out-perform.  

5th, financial markets – At the time of writing (23 Dec 2019), major equities markets have inked decent gains for the year. S&P 500 is up 28%, Nasdaq is up 34%, FTSE 100 is up 12%, Shanghai Composite is up 18%, Nikkei is up 19% and DAX is up 26%. Commodities, such as Gold and Crude Oil WTI, have been fairly stable, hovering around USD$ 1,480 and USD$ 60 respectively.

But of course, equities only paint half the picture. Look over to fixed income and bonds, and we saw at the peak in late August, USD$17 trillion of debt was trading with a negative yield, meaning investors buying bonds and holding them to maturity were guaranteed to make a loss. OR putting it simply, we are paying borrowers to borrow money! 10 year treasury yield is still trading near all time low at 1.9ish%. So maybe, we can guess that equities’ strong returns have been fueled by asset managers reaching further out the risk curve in search of positive yield.

So all in all, putting all these into perspective. How would 2020 fare?  The lower-growth environment is likely to continue into 2020. Is it end of the world? No, it is highly unlikely. As for Indonesia itself, better book your tickets now and get on the ride.