Asia Summit—Global Overview: Navigating an Uncertain World
One Man’s Uncertainty Is Another Man’s Opportunity
“What are the uncertainties you see in the world, and how would you navigate?” It’s a challenging question posed to the opening panel of this year’s Milken Institute Asia Summit.
Steven Tananbaum of GoldenTree Asset Management cited the global low-interest-rate policies that he says history won’t look kindly upon. The intended result of low to negative interest rates—accelerated growth—just hasn’t happened, Tananbaum said. As a result, you’ve just taken a very important monetary policy tool off the table.
Ravi Menon, managing director of Monetary Authority of Singapore, disagreed. “Monetary policy is vastly overrated in importance,” he said. We’ve seen low interest rates for the last seven years, although the debate has now moved to negative interest rates and additional quantitative easing, helicopter money and other kinds of innovations to justify further easing. “It completely misses the point of what is fundamentally ailing the global economy,” Menon said.
From left: Ravi Menon, managing director of Monetary Authority of Singapore; Peter Wuffli, chairman of Partners Group Holding AG
He points to trends beneath the noise of interest rates and market movements. First, he said, private investment is weak. Corporate America, despite its huge cash piles, is not investing—and this is worrisome for Asia. Another trend that worries Menon is slowing global trade. For the first time in decades, global trade is growing at a lower rate than global income. Are we entering a new era of uncertainty? Or will future sources of growth be unrelated to trade? Institute Chairman Mike Milken suggested one reason why traditional measurement of trade shows a decline. “The percentage of the world’s economy that moves digitally increases every year,” he said. “Less is going to move by ships and trucks.”
Ronnie C. Chan, chairman of Hang Lung Properties Ltd. in Hong Kong, is less concerned with the slowdown in trade. “I worry about the things you don’t worry about,” he said, addressing the Western investors in the room. “You worry about China’s economy. China will be fine…. TPP [Trans-Pacific Partnership] doesn’t worry me one bit. If it doesn’t happen, we will survive.” He went on to cite pandemics, especially the current spread of the Zika virus, as one of his main concerns.
From left: Ronnie C. Chan, chairman of Hang Lung Properties Ltd.; Steven Tananbaum, founder, managing partner and chief investment officer of GoldenTree Asset Management
Milken, however, is encouraged by the advances in technology in addressing the world’s health-care problems. Instead, he worries about the huge gap between the jobs of the future and the lack of skills and education of people to do those jobs. If people cannot participate in a 21st century world, they are going to rebel. Menon agreed that the critical component of success will be lifelong learning. The current education institutions are not set up to be “seamless and continuous” between education and work amid today’s rapid technological change, he said.
Despite the uncertainties, there is still no shortage of investment opportunities. Peter Wuffli of Partners Group sees them in infrastructure, solar, telecommunications and child care. Chan took a geographical view, saying he will invest only in the United States, which is still the most stable economy in the world, and Asia, in particular China, where the economy will be upgrading its goods and services over the next 30 years.
But to encourage inclusive growth and make the fruits of globalization beneficial to all, Menon said, public institutions need to invest in the future and work alongside the private sector. Until this is done on a global scale, we will not be optimizing the multiplier effects that investment can bring about.