An official from the Government of Singapore Investment Corp. (GIC) said he expects more weakness in financial markets in the next 12-18 months, and recommended investors hold gold and other safe assets such as government bonds.
GIC, one of the world's largest sovereign funds with an estimated $200 billion-plus in assets, has invested aggressively in troubled global lenders, picking up multi-billion dollar stakes in Citigroup and UBS in late 2007 and early 2008.
There is systemic capital inadequacy globally and the world will probably see three years of a very vicious downcycle, GIC's director of economics and strategy, Yeoh Lam Keong, told the Investment Management Association of Singapore conference on Tuesday
This is a very destructive process for assets, he said.
Yeoh, who said he was speaking in his personal capacity, showed a slide prepared by GIC that indicated global writedowns in the financial sector could reach $3.8 trillion by 2013 and that only about 30 percent of the losses had been booked so far.
Yeoh suggested investors hold gold, sovereign bonds, and currencies such as the Japanese yen, Chinese yuan, and Canadian dollar.
He said he liked gold because governments were under pressure to cheapen their currencies to compensate for falling demand, and that some countries such as the United States and Britain would eventually be forced to monetise their debt by printing money.
I would avoid these currencies like the plague, he said in reference to the dollar and sterling.
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