By Noah Sin and Jennifer Hughes
HONG KONG (Reuters) - A reduction in the risks that have bedeviled the global economy this year will help lift markets in 2020, but protests across the world are signaling longer-term challenges for policymakers, AIA Group (HK:1299) Chief Investment Officer Mark Konyn said.
Konyn told Reuters Global 2020 Investment Outlook Summit that the current economic cycle would bottom in the first half of next year and flagged Europe as the region most likely to surprise with an improvement, helped by the fading of risks including stress on the euro and that of a disruptive hard U.K. exit from the European Union.
"Europe could have been worse (in 2019). If you put that in context of the global economy, its more support," he said. "In an environment where the U.S. is doing better and China is stable, it's a better outlook."
Hong Kong-based AIA is the largest independent listed life insurer in Asia, and reported total assets worth $256 billion as of June 2019.
Konyn said that a key engine of global growth would be strong U.S. consumer spending, which would limit the need for the Federal Reserve to cut rates further - notwithstanding the "noise" of the U.S. presidential election in 2020.
"The markets will adjust to that commentary around the presidential election. We think it's another year of reasonable growth in the U.S.," he added.
In Asia, where AIA invests much of its capital, central banks would however trim rates further to offset the impact of the U.S.-China trade war.
Tariffs imposed or threatened by Beijing and Washington could shave 0.8% off global GDP in 2020 and incur losses in years ahead, the International Monetary Fund said in a recent forecast.
"NOT SUSTAINABLE"
In addition to risks to global growth, markets are paying increasing attention to anti-government demonstrations from Chile and France to Hong Kong, Iraq and Lebanon.
While Konyn did not expect the unrest to significantly affect global growth in the near term, he said politicians and other policymakers must address the rise in social inequality since the 2008 global financial crisis.
"You've seen around the world a divergence in terms of the haves and the have-nots, particularly in developed economies, where you see a strong return on capital but not so much on labor, " he said. "These are structural issues that need to be addressed because they're not sustainable."