Do not overcommit to a single solution in a multi-polar world, says ex-foreign minister George Yeo

Straits Times

11 hours ago

Former foreign minister George Yeo (left) and head of the UBS Asia Pacific Investment office Tan Min Lan speaking at the UBS CIO mid-year outlook seminar. PHOTO: UBS SINGAPORE
Do not overcommit to a single solution in a multi-polar world, says ex-foreign minister George Yeo
SINGAPORE - Some analysts and billionaire investors have recommended moving investments away from US assets wholly in the current volatile geopolitical climate.
However, the best investment move would be to not overcommit to any one solution and take smaller steps while diversifying risks.
This was the advice given by Mr George Yeo at the UBS CIO mid-year outlook seminar on July 1 held at the Fairmont Hotel.
Mr Yeo, who was foreign minister from 2004 to 2011, was sharing his views in a dialogue with Ms Tan Min Lan, head of the Asia Pacific Investment Office at UBS Global Wealth Management.
He stressed that despite rising tensions amid an ongoing tariff war, US-China relations should stabilise in the next five to 10 years as both superpowers are unlikely to escalate tensions further.
For investors, this means that there is no sure-bet on a single horse . They should diversify their risks accordingly as the global economy transitions to a multi-polar world, with Europe also moving away from its economic and military dependence on the US.
'The ground is shaking, so build smaller structures linked together sensibly instead of bigger structures. Don't assume one outcome or the other, but diversify risks in your portfolio, whether you are a country, company, family or individual.'
While the US is perceived to be on a political decline in Asia given recent policy shifts and upheavals by the Trump administration, as well as an increasing divide in its domestic politics and society, Mr Yeo said the country has historically shown its ability to recover from downturns and renew itself. Amid talk of the end of American exceptionalism, he countered that its legacy will continue to endure for decades.
At the same time, he added that the world has already been headed towards an increasingly divided global environment, and the arrival of Mr Donald Trump as US president has only hastened this outcome. 'In the short term, we have the phenomenon of Trump and everyone gets nervous about what he says. But he is being carried by big events. He will come and he will go, and he would have quickened the arrival of the multi-polar world. I describe him as fast-forwarding the future.'
A multi-polar world may spell even more uncertainty for global markets, but Mr Yeo emphasised the importance of adaptability and flexibility. 'We have to be prepared to speak multiple languages and work on multiple operating platforms, instead of just being stuck on one.'
Playing down China's increasingly prominent role in geopolitics, Mr Yeo said the Asian giant's focus is on keeping the peace in the region as it is not in its interests to get involved in the distant conflicts in Ukraine and the Middle East. South-east Asia could see transformation 'beyond recognition' in this new era of peace, he added.
A weakening US dollar would open the door for more growth in Asia, with local currencies expected to appreciate another 3 per cent to 4 per cent over the next 12 months. Regional financial conditions would also be eased as a result – a positive sign for local equity markets.
Sharing her views on the growth potential in the region, Ms Tan said the bank has upgraded Singapore equities to 'attractive' due to the stability of the local market amid ongoing geopolitical uncertainty.
'Singapore offers a defensive safe haven backed by a stable currency, generous dividend yields and a steady earnings outlook. The ongoing equity market reforms provide additional catalysts in the form of a $5 billion capital injection and potential value-up initiatives to unlock shareholder value.'
With the US dollar's traditional role as a relative 'safe haven' during periods of market uncertainty no longer guaranteed, Ms Tan recommends diversifying to other currencies such as the euro and the Australian dollar, while allocations to gold are also a good option to diversify political risks.
Artificial intelligence (AI) was highlighted as one of the biggest areas for strong returns, given accelerated adoption and monetisation in infrastructure and semiconductors . Other areas ripe for investment growth include power and resources, amid surging electricity demand and the global energy transition; as well as longevity due to demographic shifts and rapid innovations in healthcare, medtech and wellness.
The ongoing technological race that the US and China are locked in, proliferated by developments in AI, would ultimately lead to a split , said Mr Yeo.
His sentiments were shared by Dr Kai-Fu Lee, chief executive of Chinese AI company 01.AI, who also spoke at the seminar.
'American companies are typically more willing to take risks and this leads to higher levels of innovation. Chinese companies, on the other hand, are more risk-averse, but they have stronger engineering capabilities and this allows them to quickly close the gap with the US.'
The tables have also been turned in the tech industry, with China defying expectations by championing the development of open-source AI language models for unfettered access, including DeepSeek and Quant. Conversely, American tech giants Google, OpenAI and X (formerly Twitter) are increasingly closed-off.
But the former president of Google China, who is also the chairman of Sinovation Ventures, a Beijing-based venture capital firm focusing on next-gen deep tech companies, was quick to note that the AI race is not static and there is still a lot of room for China to catch up.
He said China still needs top-end graphics processing units, or GPUs, to accelerate its development, and these are usually reserved for US companies.
'The venture capital ecosystem is also not as strong as 10 years ago, and it needs to rebuild again,' he added.
The July 1 seminar drew over 1,000 UBS clients and guests.
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