Some of the Major News we have for the month:
- China Overtook Japan as the 2nd largest economy in the world in the 2nd quarter 2010.- US growth expected to revise 1% less as unemployment and retail sales are still tepid.
- US Federal Bank may take action to stimulate the economy if it really stalls. This brought jitters to investors as they feel that the government has a lack of confidence.
- Japan Yen reach a new high as investor sought safe haven from Euro and USD. Gold price climbed back to $1200 after a correction.
- Energy prices remain under pressure as growth slow and energy needs fall. Meanwhile, global natural disasters pushed agriculture goods prices to a new high.
- Property market in China continues to slow but Foreign Direct Investment (FDI) continues to climb for the 12th consecutive month.
Let’s have an overview of the commonly invested funds:
The first and the last funds are not my commonly recommended funds but is to act as an illustration as to which is the world’s worst and best markets. The Funds are arranged based on their 1 month performance from the Best to the Worst
The political chaotic, multi-colored shirt Thailand comes out top for the month of Aug. In fact, Thailand has been coming out in the top 5 performing countries for the past few months. Thailand growth and recovery is nothing short of a miracle with FDI still strong and the government still greatly supports MNC starting up shop in their country, Thaksin or no Thaksin. The stock market is volatile with violent dips when political upheaval comes again so it is not a market for the faint hearted. The best way to gain exposure is through a SE Asia fund with a good diversification from Thailand.
Other top performing sector this time round are Gold and resource, and SE Asia with the Indonesia and Singapore markets still performing quite well despite tepid growth coming from US and Europe. Thanks to China! Brazil is a surprise winner this month pushing the BRIC fund into a relative good performance.
Worst performing sector also comes from SE Asia as Vietnam leads the pack. Vietnam stock market is extremely small and illiquid and it can be badly affected when FDI flows out of the country. With the world investment funds flowing to China, Taiwan, Thailand and Indo, Vietnam is missing out a big piece of the pie. Vietnam needs to develop its equity market for investor interest to flow there. High yield euro and US bonds funds are also at the bottom of the pack. In short, most of funds associated with the developed world is leading at the back of the pack. It is not illustrated in my commonly used fund as I have no exposure to these sectors for my clients.
The month of August is generally a good month as the markets around the world recovered from a minor correction since May. Many investors have been asking me have been asking me, “Why am I still in red since 1 year ago? I thought Singapore has record growth? Where is my profits!” The bad news is, the stock market hasn’t really been behaving for the past one year. In fact, most investor would not have made any gain in most global markets for the past year if they have not invested in SEA or Gold.
As you can see from the USA S&P500 index, the market hasn’t move a single inch since last Sept. It means, if you have invested in US for the past one year, you would have “ZERO” returns. Europe index are even worse, you would be losing heaps of money. Lets take a look at the Singapore market with a record expected growth for Singapore.
The reaction will be the same as US. No returns since Dec 2009 and we are nowhere near the previous high yet at STI 4000. Why isn’t the stock market doing well if our country is growing rapidly? Well, I can think of a few reasons but the one that strike me the most is that elections are near and maybe the newspaper are broadcasting the good news and giving the bad news a much smaller column, to help citizens feel better and make the right choice when voting comes. In any case, there is not much room for the newspapers to carry bad news as there are so much news to report: The Great Singapore Sale, National Day Parade, Youth Olympics, Formula One and people cheating in Casinos and getting fined and jailed. Many investors are worried about a double dip recession. The chance seems to be slim for now with governments ready to pump in more money at a drop of a pin of negative growth. I am more worried about a trendless market with no movement for the rest of the year. However, the good months of Oct, Nov and Dec are coming upon us and that’s when the market usually have a nice rally. We can always hope for it!
In any case, what are the sectors to look out for in the coming months. My recommendations remain the same: Stay out of US and Europe with the exception of Gold and resource funds. Stick to Asia especially SEA and stay out of Japan. There is one sector that I am beginning to get more interested: Australia. There seems to be some activity going on in that part of the world despite its tepid stock market, but can yield potential good profit in terms of equity and currency gain. There is no strong indication to move in yet but I will keep track.
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