After riding out a very challenging year, fund managers in Singapore are generally upbeat about the market outlook for 2024, a new survey finds.

Against the backdrop of cooling inflation, 57% of respondents in the annual survey of the Investment Management Association of Singapore (IMAS) predict a 2.9% global economic growth, with 1% expansion in the United States, 4.2% in China, 1.2% in Europe, and 1% in Japan.

They also expect China’s real estate market to stabilize, leading to a positive outlook for Asian financial markets.

The IMAS outlook survey represents the views of some of the largest fund houses in Singapore with combined assets under management of over US$35 trillion. This year’s edition saw participation from 79 respondents, comprising mostly C-suite personnel of fund houses.

A new segment for the 2024 edition covers elections in Asia with 60% of respondents declaring that Taiwan’s presidential election has the highest potential for a surprise.

Dampened demand

Meanwhile, environmental, social and governance (ESG) investing has declined in the pecking order of priorities of fund managers, IMAS says. Certain types of ESG strategies have underperformed, and this has dampened the demand for ESG investment products, particularly among retail investors.

However, asset managers continue to identify ESG as one of the top three future drivers of investment growth and ways for them to differentiate their business, suggesting confidence that ESG demand will continue to grow despite recent setbacks.

“This year, we are seeing an increasing demand for innovative products in alternatives and digital assets, overtaking ESG investments for pole position,” says IMAS chairman Jenny Sofian. “This reflects an important shift in investor mindsets, led by the growth of millennial investors.”

For 62% of respondents, the integration of ESG principles into their operations remains a top priority for their ESG strategy this year. However, the lack of data standardization and the diversity of ESG standards remain the most frequently cited barriers to implementing a comprehensive ESG strategy.

Disruptive technologies

With the rising trend of innovative products, many fund managers are looking to expanding their capabilities in advanced analytics, machine learning, and artificial intelligence (AI).

They also anticipate that technology will continue to disrupt fund operations, the middle office, and the research industry.

The IMAS outlook predicts the US dollar is likely to maintain its current exchange rates against the Singapore dollar and the Chinese yuan at S$1.37 and 7.32 yuan, respectively, while 65% of respondents believe the fed funds rate will see a reduction this year.

Most respondents also believe the J.P. Morgan Asian Credit Index will end 2024 stronger with a 50-100bp drop in yield, while the MSCI AC Asia Ex Japan and China Indexes are expected to rally by 10% to 20%. Overall, market indices are forecast to exhibit stronger performance in 2024.