Annual Investments Report 2011

Dear Friends,

Attached is the annual investment report for year 2011. It will give you an idea of my thinking process and methods when dealing with last year volatile and uncertain market situation. I have cut the pages given that there are complaints that 2010 report was a tad too long. Hope you enjoy it!

Happy Chinese New Year!

Click here for Report

Here is an excerpt from the report:

In the line of our work, we get to talk to many analysts and economists who have more degrees under their belt than I have. However, I find that they generally give inaccurate predictions. Let me give you an example by listing some of the investment ideas for 2011 by a major investment and research house, who are regularly being quoted in our mainstream media.

Recommend 1: North Asian markets are expected to do better than South East Asian markets

Results: SEA markets performed much better than North Asian Markets.

Recommend 2: Avoid gold funds.

Results: Gold future funds are some of the best performing in 2011. Gold shares however did badly. They are predicting a fall in the price of gold which is incorrect. If gold shares did not diverged from gold prices, they would have done well instead.

Recommend 3: Outperformance of the small caps.

Results: Small cap lost much more than that of large caps during the year.

Recommend 4: Favourite single-country equity market: Taiwan

Results: Taiwan stock market lost -21.18% in 2011.

Recommend 5: Least favourite single-country equity market: Indonesia.

Results: Indonesia is the best performing market in the world.

It's a quiet December. No News is Good News

Merry Christmas and Happy New Year. Sorry for being late with the newsletter. The reason is because I want to update you on the new regulations set up by MAS, which will be implemented in 2012. 

Going into 2012 will be a set of new challenges and tricky waters. Despite all the doom and gloom predicted by economists and our dear government, there are still bright spots in the global economy. In any case, economists and our government have been giving lousy predictions since 2008: Maybe we should try a contrarion approach to all the predictions? December is a relatively quiet month. No news is good news in today context. Here are a list of the important economic events for the month.

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1)      Employment and manufacturing data from US turns out to be better than expected. US market rallied on hopes that the US economy is recovering faster than expected and is only marginally derailed by the Euro crisis.

2)      The European Union made little headway in December to solve the Euro Crisis. Italian unveiled a new austerity policy while the EU central bank cut their target lending rates. There is no glaring bad news, neither are there very good news.

3)      The death of North Korea’s dictator Kim Jong II caused intitial panic selling in Asia, especially in the South Korean market. However, the Asian market recovered quickly when no unexpected events took place in North Korea.

Short Look at 2011

History will look back at 2011 and name it as the year of the unexpected. Many conventional wisdom are broken and in many ways, rewrite the way which we look at the world. The rise of social media sparked of the Arab Spring and we had a quite a number of government change in Middle East. This created a lot of tension in the energy markets. The weakness of the western societies are exposed in both the US debt debacle and the EU debt crisis. The political brinkmanship of American politicians on the issue of raising the debt ceiling caused the every single markets to roiled in uncertainty. The subsequent downgrade of the American prized AAA ratings by SnP led to more uncertainties. The EU crisis, which started as a small solving problem called Greece, grew out of hand as EU politicians try on solve the issue on a piecemeal basis. The contagion spread and threatened to engulf every nation in the EU zone. A number of European political leaders met with their downfall thanks to the crisis. On the natural disaster front, 2011 was an extremely unlucky year for the Japanese. The April combo of earthquake, tsunami and nuclear meltdown crippled the world’s 3^rd largest economy and lead to a poor showing in the Asian markets. The Thailand flood affected one of the most vibrant economies in South East Asia and Japan companies, with many of their factories located in Thailand, are badly affected again. Combined with scares from US and Europe, the Asian markets are one of the worse performing markets globally due to a convergence of natural disasters and economic risks.

On the bright side, we see the US economy improving in almost on all front. Asian governments also started to loosen their monetary policies in anticipation of a slowdown in the global economy. Valuations of the equities market is very attractive and such valuations are unseen since the 2008 great recession.

To sum up, 2011 proves that we are still paying for the excesses of the financial crisis and global recovery is not really in sight yet. History has shown that such a deep recession will take some time to recover. It is similar to the human body. The worse the injuries are, the longer it will take to recover. The rewards will be very sweet for those who are patient.

I will delve a bit deeper in my annual investment report and the strategies to adopt for 2012.   

New Compliance Guidelines

From the 1^st January, MAS requires all investors who are Singapore Citizens and PR to take a Client knowledge Assessment. This is to ensure that advisers understand the depth of client’s investment knowledge so that they can give more appropriate advice. All investors are required to complete the assessment before they can make any buy transaction. Client’s only need to eligible for one of the factor or pass the assessment. The requirements for passing are as follows:

1)      Education Qualification in a finance related field: BBA, Diploma in business

2)      Professional finance related qualification: CFP, ACA

3)      Relevant investment experiences: Have made 6 transaction in the past 3 years

4)      Work Experience: Have 3 continuous years in working with investment products

If you do fail in the CKA, you will be required to take the advice from the adviser. Should you choose not to heed the advice, client will not be able to rely  on Section 27 of the FA Act to claim a civil claim on unreasonable or inappropriate advice. You do not need to fill in the CKA if you are a foreigner, a corporation or an accredited investor with more than 2 million of Networth.

 

Let’s all pray that 2012 will be a better year!

Turmoil in Europe

November is a chaotic month for Europe. There are so many twists and turns in the current Euro saga that makes it almost impossible to predict what comes next. On the bright side, the global stock markets did not collapse as what it did in August 2011 or like Sept 2009. 4 years on since the start of the financial crisis, the end of the road to a global recovery seems to be further and further away. There are still bright sparks in the gloomy global economy.

Here is the summary of the events in November:

-          Greece prime minister Papandreou wanted to hold a referendum to get support from the Greece citizen on the EU bailout. That resulted in a tremendous backlash as the world and the Greek citizens were horrified. Germany and France threatened to kick Greece out of EU and Papandreou withdrew his request for a referendum. He was asked to step down due to this blunder and a technocrat government is formed with Lukas Papademos as the head of the new government.

Silvio Berlusconi Resigns as Italy Prime Minister

-          Italy came into the spotlight as Greece set about to form the new government. Silvio Berlusconi, the prime minister of Italy than, was pressured by the public  to resign. Italy 10 years bond yield surged to a record high above 7%. This is the range which other European countries such as Portugal and Ireland asking for a bailout. Following Berlusconi's resignation, Mario Monti formed a new government that would remain in office. Global markets fell fearing that a Italy default will spark off a new global recession.

-          France and Germany, the backbone of the EU, came under attack. Yield of 10 years French bonds spiked and rating companies threatened to downgrade France AAA rating. Germany recent bond auction was disappointing as less than expected amount was sold. Fears that the strongest economies of the EU are also infected by the crisis leads to further sell-offs.

-          US Super-committee, made up of 6 Republicans and 6 Democrats, failed to come up with a plan to reduce the US deficit. The members of the committee could not see eye to eye on the usual issues. Republicans want to slash spending and are targeting the healthcare benefits while Democrats want to raise tax for the wealthy. The US market lost 2% that day. Compounded with problems from Germany and France, the market seems to have factor in the expectation that the Super-committee will be Super-Useless.

Members of the US Super Committee

-          The property situation in China is starting to worsen, and exports are expected to fall as China’s largest market, Europe, is still in turmoil. Fears that the thin support which is holding up the global economy at this point of time, may collapse and lead to a new recession in the developing countries. China started to loosen their grip on banks and ordered the banks to increase lending to SME around the country. The China government is still hold on to the curbs on the property market, trying to guide it to a soft landing.

-          One of the better news of the month came from US. The black Friday sale, the busiest shopping day of the year for US retailers, clocked 7% increase in in-store sales. This is one of the largest rise since the Great Recession. Cyber Monday, the day when online retailers give big discount, reported a 33% jump in sales. Other than telling us that online shopping is becoming the latest growth area in retailing, it also gave the assurance that the American Consumers are coming back online after a 4 years hiatus.

-           6 major central banks around the world eases their monetary policies in a coordinated motion to calm the markets. China also eases banks reserves to stimulate growth in the face of an impending global slowdown. Major markets around the world soar with the  Dow Jones Industrial index gaining the most since 2009.

The Strategy Forward

I am sorry that the summary.. is too long to be called a summary but many things happened in November. I have been debating whether to lock in profits for US, Korea and BRIC funds throughout the month as the situation becomes more and more uneasy. I was once asked by a friend, on what are my thoughts on Germany failure to auction their bonds in the market. My reply is: Good and Bad. It is bad because it shows how far the contagion has spread and EU may topple anytime. The good is that politicians will have little choice but to implement unpopular policies to save the country. The major rally on the 30^th of November essentially help me made the decision to hold on to the current portfolio allocation. The main reason is due to the major rally may have  turned the sentiments around and based on technical analysis right now, actually looks bullish. This will become a self fulfilling prophecy and drives the market up further, at least till the end of the month. The long term effect of the austerity measures around the world will lead to slow growth around the world. The stock market may behave like the 1970s when the market has been stagnant for a decade before climbing higher. In this case, buy and hold for long term will not work well, because 12 years, by most investors standard, is too long a wait to see any returns. A more nimble wave riding strategy must be employed and lock in profit whenever the run is waning.

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Greece Screws the World!

 Just when the world think that they have a few months of respite from the Euro crisis, our antagonist strikes again! With a twist worthy of a Hollywood movie, Greece has decided to pull out a fast one on the Euro community just days after a new bailout agreement has been hammered together. The Greece prime minister George Papandreou decided to call on a referendum in which Greek voters will either approve or reject, the latest Euro zone bailout plans. If the Greek citizens reject the vote, Geek will probably be forced to leave Euro and financial mayhem will prevail. We may well see a real double dip recession should that happen

The move blindsided European leaders who have worked for weeks to cobble the recent deal together. Global markets, especially those in the Eurozone dropped drastically on the news. The country that invented democracy is now asking the citizens to make the most important decision in their entire lives. Politically, Papandreou hopes to use this referendum to consolidate his political power and get a strong mandate by the citizens to see the country through this difficult time. He is also trying to hold the Eurozone hostage by using the referendum to bargain for a better bailout plan.

Essentially, Europe’s latest bailout plan, although has been a vast improvement since the last one, is still short of what is really needed. Just to recap on what the bailout consist of: A 50% reduction of Greece debt and a larger EU bailout fund to 1 trillion euros from 400 billion euros. According to some estimates, the writedowns of Greece’s sovereign debt should be much steeper. The reduction should be increased to 70 percent to make Greece’s debt burden bearable. On top of the, the Euro zone needs at least 3 trillion euros to ensure that Europe’s banks are well funded and at the same time, help out Italy should they need the funding. Most Greeks are unfavorable towards the latest bailout proposal as it comes with many strings attached. 58% of the citizens polled are negative against the Euro deal, creating a possibility that the Greek Referendum will fail. However, on the other hand, 70% of the Greek polled said that they want to keep the euro. Well, you get the picture. The Greek wants both their cake and ice-cream without suffering any from any health problems. Papandreou cunningly avoided stating an exact date for the referendum to take place, allowing the European leaders time to sweeten the deal.

From here, 2 scenario will happen:

1)      The Greeks voted yes. Papandreou will win the mandate to continue with the unpopular measures and weaken the power of the opposition parties. It might calm the street protests and unending strikes and bring some political stability to Greece. This will also calm global markets and bring stability throughout Europe.

2)      The Greeks  voted no. Greece will probably be kicked out of the Eurozone and reverts back to Drachma. The economy will be kicked back a decade but they can now default on their debts and have more flexibility in managing the economy. The Euro zone meanwhile will be thrown into turmoil and global economy may well dip into another recession. It will be an extremely painful process, but that will probably purge most of the excesses enjoyed by the western economy for the last decade.

The Market Did not React As Badly… As I Feared

When the news broke, I was expecting a massive sell-down in Asia this morning. Given that most European markets fell more than 4% and the USA market fell more than 2% overnight, I was prepared for the worst this morning. However, the good thing is that things did not play out as what I expected. Asian markets actually staged a massive rally on news that China may be considering loosening their economy given the headwinds faced by the global economy. The European markets are rallying as the time I am composing this newsletter. My consideration now is that we are back to square one, in the almost exact situation as before the bailout, should I take some profits off the table from Korea and BRIC funds in anticipation of the coming referendum. After today’s market action, it seems like I do not need to make a decision so soon as of now as the market seems to be calm despite the shocking news. I will probably observe market movement till the end of this week to make a decision. Meanwhile, the switch to America should still go on as the USD and American market is still a safe haven compared to European and Asian markets. Stay tuned!

Some Light in the Tunnel - Market Soars Back

The month of October has been a very eventful month with emotions and tension at the peak. The market volatility is very high, some traders even commenting ,”It feels like 2008 again!” On the brighter side, good news from the USA and Euro zone has helped to pushed global sentiments back up and the world economy seems to be on a better footing now. Let’s Recap what has happened for the month of Oct:

-          US advance GDP data showed that the economy expanded at a 2.5% clip during the third quarter. That exceeded the 2.3% growth rate that had been broadly expected to follow the 1.3% increase in output posted in the prior quarter. 

-          European Union's (EU) plan aimed at improving the continent's precarious financial conditions boosted global markets. Although specifics weren't released, participants were pleased that the plan will increase the euro zone bailout fund to about $1.4 trillion, recapitalize banks, and cut Greece's debt obligations by 50%

-          70% of US companies reported solid Q3 earnings and beat expectations, despite fear of a double dip recession persisted throughout that period. This put US economy on a stronger footing and warded off rumours of a double dip recession.

-          Commodities prices staged a strong rally as investors now believe that the world economy is not as bad as they expected. The Euro rescue plan assured the commodities market further.

-          Thailand flood situation worsen and the stock market underperformed the rest of the world. Companies around the world faced industrial parts and commodities shortage as a result of the flood.

End of Tunnel? Not Yet…

Major media around the world are warning about potential doom and gloom ahead, even with the improvement in the financial measures put in place by the Euro zone. I tend to agree with some of the views but I am not that pessimistic about the world economy. As I mentioned time and time again, we have emerged from a recession never seen since the Great Depression and the Great Recession essentially sent most of the developed nation on a slow grind. The huge Western economy is  like an oil tanker. It takes a while for an oil tanker to halt its reverse and to pick up the momentum to move forward again. Macro indicators are accommodative and we will see the economies get better, but toppling and crashing into a couple of ice-bergs along the way. The way forward by all means is not clear, but by spotting opportunities ahead, we will be able to minimize damages and improve returns. The coast is clear for now, at least till the start of next year.

The Greece problem has been delayed, at least for now. With the 50% cut in debt obligations, Greece have bought more time to restructure their economy, and bought more time for the Euro Zone to devise a plan on getting Greece kicked out of Euro, in an orderly fashion… In my opinion, the entire Euro debt crisis is a positive development in the long run. The recent problems have brought to light serious structural problems on the EU concept and allow key EU members to tighten and amend their rules so that similar incidents will not occur in the near future again. In the first place, the European Union is a revolutionary concept in modern economics and it should not come at a surprise that no plan works perfectly. This episode will lay the foundation for more sustainable growth, at least in the next 10-15 years.

The China Property Market Shows Signs of Cracking

A group of around 400 homeowners in Shanghai demonstrated publicly and damaged a showroom operated by their property developer after the company said it cut prices. Home buyers had wanted to speak with the developer to refund or cancel their contracts but were unsuccessful, according to local media. Read Here . How does the Chinese property market affects Singapore? Apparently, Chinese nationals are the top foreigner buyers of Singapore property, accounting for one quarter of the sales to non Singaporeans.  As a whole, foreign private property buyers made up 16 percent of the 6,368 purchases in the first quarter, constituting the highest proportion of non-Singaporean transactions since data were first made available in 1995. Read Here . Earlier in October, Asian currencies and markets tanked as western countries cashed out of emerging markets to buffet against any fall-out from the Euro crisis. This is despite the clear superior fundamentals Asian markets have over the troubled western economies. The same local biases will happen once the China property market suffers a hard landing. Chinese property owners will liquidate their position in Singapore to protect their positions back home. Singaporeans, with their highly leveraged property investments, will be hit hard. Compared to the stock market where most Singaporeans do not take a leverage and has the ability to hold, a property market crash will be much more disastrous than a stock market crash. Whether China suffers a hard landing or a soft landing, it will be almost impossible to predict given the lack of historical precedence and lack of transparent data from the Chinese government. Similar to the Shanghai Stock Index crash, The Chinese has gotten an appetitizer on what their first ever property crash ,since the embracement of capitalization, tastes like.

The Strategy Forward

I have moved a portion into Singapore bonds as a form of insurance in case of a disorderly default by Greece. The risk is averted for now, at least until the end of the year. There is no reason not to ride on the positive goodwill generated by recent events. I have picked US market for 2 main reasons: First Reason is that the US economy is still at the recovery stage and it always make sense to invest in countries slight behind at the economic cycle. Secondly, with a still uncertain European market, and worries about the Chinese property market, the American stock market is still the most resilient of all the markets in the world. It will performs the best whenever there are a peppering of uncertainty along the long road of uncertainty. The bet on the Korean market paid off with a handsome 17% month on return, despite some initial big volatility right after the switch. Commodities fund made a come-back after a significant correction during the last few months. Sad to say, the Thailand flood has affected our SEA positions and is not performing as well as expected. A Sharp 5% appreciation of SGD against the Indonesian Rupiah also wiped out a chunk of the performance from our Indonesian position. I expect the SEA to perform once the flood problems in Thailand subsides and catches up with the rest of the world in the rally. We will probably take some profit off our Korean positions early next year. For those who stay put with the BRIC or with full equity exposure, I will switch you into US once the market rally slows down.

Attached are 2 performance Chart. One is the index performance chart in their respective country currencies while the other is the fund performance chart. As usual, the best performing fund and worst in the fund universe is used as comparison.

     

The Future Muddies. No Clear Sight to Immediate Conclusion

The month of September has been a very volatile month with markets whipping up and down on every good or bad news. Asian markets have been hit severely as compared to Europe and US and are the worst performing markets despite better fundamentals. The future of Greece remains uncertain. The reaction of the EU political will remains uncertain. The possibility of passing a new job creation bill by Obama is also uncertain. All this uncertainty is certainly weighing on the markets. Let’s take a brief look of some of the major good and bad of the month:

-          The Federal Bank of US announced a plan to swap long term treasuries with shorter term treasuries in an effort to lower long term interest rates. The plan, labeled as “Operation Twist” failed to impress investors. Economic indicators from US are mixed and doesn’t really tell us much from what we already knew: The US economy is slowing down.

-          Gold and precious metals were put on pressure after a record run and corrected from the peak of more than $1850 to low of $1600. The US treasuries rallied after assurance from market action that the S&P credit downgrade of US treasuries hasn’t dented its traditional role of haven of safety.

-          Approval by the German parliament to expand the European Financial Stability Facility helped to restore some positive sentiments to the European Crisis but data from Greece increasingly points to a crisis in making unless European leaders pull their act together.

-          The Asian currencies dropped sharply relatively to both USD and EURO as foreign investors sold off “risky” Asian assets and remitted the monies to their home countries. Asian equities corrected sharply and is underperforming the global markets despite stronger fundamentals.

-          China manufacturing continues to be strong lowering the fear that a hard landing may prevail for the 2^nd largest economy in the world. Japan economy is recovering rapid from the Great Earthquake. YEN rose sharply against SGD making the Japanese stock market one of the best performer in the Singapore fund universe despite little movement in the stock market itself.

September saw investors milling around like headless chickens, unsure of the future and dissecting every piece of news with great relish. It is of no surprise that investors prefer to stick to cash under such volatile and uncertain conditions. Irrationality is taking place as can seen from the panicky withdrawal of funds from Asian markets, which is still doing very well relative to the European and US markets thanks to the growing domestic demand of middles classes in China, Indonesia and India. One of the reason why the newsletter is late is for me to formulate scenarios and plans to tackle this difficult investment period.

Muddy Waters

“The water is muddy” as the saying goes.

Based on my set of indicators, there is no clear decision to be made: To get out to cash or to hold on to our present aggressive stance. Macro economic indicators are still accommodating with ultra low interest rates and loose monetary situation. Government around the world may start pumping in government incentives to reignite their economy despite blooming trade and budget deficit in the Western world. It is always better to let your political successors deal with the problem of larger deficit than to get ousted from office due to a sharp recession. However, with the probability of Greece defaulting and political will of European leaders still in limbo, the chances that sentiments overruling any fundamentals are getting higher every moment.

Technical indicators are unclear. Asian equities are clearly on a downtrend. However, markets in the eye of the storm: US, Eurozone are actually doing much better with many of the markets including US moving sideways. Germany and Switzerland markets are even trending upwards during the past month. This indicated that there are some support at this level in the Western world.

In short, anything can happen that can push the markets either way rapidly with little or no time of reaction.

My dilemma is on how to capitalize on any of the scenarios and try to make the best of situation. As I explained in my past newsletters, funds switches usually doesn’t react to the situation in time and many of the actions must be preemptive… which is highly difficult to achieve at this point of time. If I should switch out all to cash and bonds right now and the situation improves next day, the investors will be worse off as they will miss out a big portion of the market rally. On the other hand, if I stick to the aggressive portfolio, the volatility may be too much for most investors to bear. In the longer term, appreciation of the values of the stock market is certain given that the markets around the world are cheap. 

The Best Solution Today...

The best solution in my opinion:

1)      Ride out the volatility and trust that the market will recover in time

2)      Have some cash at hand to capitalize on any panic

3)      Stick to fundamentally strong economies: Korea, Indonesia, China, to catch strong rallies should they occur

I am still positive about that the market is oversold and is irrational at this point of time. Therefore, my allocation at this moment of time will be 80% riskier assets while keeping 20% in safer assets until the waters are clearer. I will recommend moving some funds to Lion Global Singapore Fixed Income Investment as an opportunity fund, while letting the rest of the portfolio weather the volatility. There will be no movement in the precious metal area as the market just corrected sharply and some observation time is needed before we can tell if the correction is an opportunity or prelude to more falls in the future. I have attached the fund fact sheet with the newsletter. As of 1 Oct 2011, the average portfolio has lost around 6.7% for the month of September. Attached is the fund performance as usual with the best and worst performer in the fund universe as comparison.

Chaos in the Market. The Market Turned Positive Month End

August has been such an eventful month that I sent out an emergency report. The situation has turned visibly brighter since then. I mentioned a potential insider trading job in the S&P and the could be news leak before they announce the US credit cut. It seems like the US government has similar suspicions too and they have initiated an insider trading probe. Here are some of the events since the last update:

1)   Ben Bernanke, the Federal Reserve Chairman announces no new measures and foresee that the low interest rates will move the economy in the right direction sooner or later. He also announced that the Fed will keep interest rates low until 2013

2)   Warren Buffet took a stake in Bank of America, boosting confidence in banking stocks in US. The market rallied on the news

3)   Economic data from US are mixed with surprising and depressing data every other day. The market is rocked from the opposing views and remains volatile into the last few days of August.

4)     Greece second and third largest banks merged to create the largest lender in Greece. The merger ignites the hope that it will help to stabilize the credit crisis as the banking system in Greece will become more liquid.

5) The Chinese government continues to tighten the economy but with a much more moderate stand by increasing the liquidity reserves for banks. The Chinese government has halted the rise of interest rates due to the recent economic troubles

6)      6)Gold prices tumbled as the world economic situation is not as bad as it seems while oil prices rallied.

The Condition For a Recession

There has been much fear recently that the world economies will be heading for a double dip recession. Even our president elect Tony Tan claims that his expertise is needed to navigate the possible recession ahead. My position is that a double dip recession will not be likely and any recession will probably be quick and short. Financial history is always useful when it comes to analysing the economy. Although many has claimed that the world has changed and past economics will probably not work, but certain principles still holds true till this date. There are 3 factors which I use to ascertain whether the economy is about to go into a tailspin:

1)       Relatively high interest rates

2)      Complacent government and market

3)      There is a bubble formed

For example, during the 2000 – 2003 dot com crisis, the US economy has underwent unprecedented growth thanks to the internet revolution and dot com stocks are creating a huge bubble. Interest rates has risen to a high since the early 90s and the government is confident about the future and Boom, the economy is sent into a tailspin. If you observed during the 2007-2009 great recession, you will see similar trends. In today’s context, most of the factors are not in place for a recession. Interest rates are low around the world. The government is cautious and ready to take action, although major governments around the world are paralyzed by partisan politics. There are 2 bubbles formed around the world: The European debt crisis, which is actively being managed now and should deflate with control. The other bubble I am more worried about is the China property bubble, which has a more direct impact to us than the European debt bubble. However, with the Chinese government trying to minimize any future damage using Draconian measures, the bubble is not in immediate risk of bursting too quickly.

Which is why, I am still confident of the global markets despite mass panic and fear around the world.

The Panic Subsides

The recent Libya civil war, Hurricane Irene and Presidential Election have distracted much attention from the worries of the markets. The news paper no longer splash dark depressing news on the front page, although there are still many analysis who are still predicting negative scenario. The global market had rallied consecutively for 3 days on bargain hunting and positive news from Greece. From a technical analysis point of view, the recent movements points to a positive trend and from a value investing point of view, stocks has never been cheaper since 2008. Given all these strong signals, I wondered sometimes why some investors are still cowering in fear.

The Strategy

Gold did tremendously well in the last month while the worst performer was the best performer for the past 5-6 months before the panic strikes. Gold hedge funds, with their ability to buy in gold futures and leveraged on margins did extremely well as compared to gold mining stocks which conventional unit trust are exposed to.  The problem with gold hedge funds is that you need to be a accredited investor in order to qualify. In any case, it is too late to get into gold as it is severely overbought. Right now, the attractive country is Korea with the market down more than 20% since the crisis. To capitalize on this major correction, I will be moving from either Aberdeen Emerging Market and Aberdeen Pacific Fund to Korea. Take note that only SRS and cash clients will be able to do the switch.

Attached is the fund performance below. As usual, the best performer is right at the top and the worst performer is right at the bottom.