BFM 89.9fm's Market Watch segment recently conducted an informative interview with Tim Waterer, KCM's Chief Market Analyst, on 28 March 2023. The segment was hosted by celebrated radio presenters Wong Shou Ning and Shazana Mokhtar as they discussed the recent turmoil in global financial markets following the fallout from the Silicon Valley Bank (SVB) and U.S. banks.
Tim Waterer shared some great insights on how the financial markets respond to the current situation and what investors can do to achieve an optimum balance of risk and return in these uncertain times. One interesting point he made was that when a major bank makes headlines for all the wrong reasons, financial markets tend to go into a defensive footing. However, he pointed out that the financial foundations of Deutsche Bank appear to be more solid than that of other banks like SVB and Credit Suisse.
Regarding ANZ's CEO Shayne Elliot's comment that the current turmoil is more akin to the savings and loan crisis of the 1980s to early 1990s, Tim agreed, saying there is some truth to it. However, he added that the current turmoil is different from the GFC in that banks have gotten into trouble by investing in bonds, usually considered safe assets.
Tim also gave great advice on where investors should park their money to achieve an optimum balance of risk and return in these uncertain times. He noted that traders tend to seek out traditional safe-haven assets during volatile markets. However, the trend lately has been to seek out lower-risk, lower-yielding assets until the market stabilises.
When asked if Asian emerging markets carry less overall risk compared to G7 nations, Tim noted that the banking sector across Asia is holding up quite well and has not experienced pockets of trouble in the U.S. and Europe. However, he cautioned that markets across Asia will not be immune if we see a worsening banking crisis that leads to a recession.
In conclusion, Tim advised investors to be nimble as market moves are headline-driven, and sentiment can swing quickly between risk-on and risk-off. He also cautioned that while high-interest rates will theoretically lower inflation, they will also lower bond prices, which could hurt the bottom line of banks holding U.S. Treasury bonds on their books. Therefore, investors should stay informed and be prepared to adapt to changing market conditions.
Look out for Kohle Capital Markets' (KCM) future interviews with BFM 89.9fm.