It has been a quiet time for the stock market in the last few weeks as the world cup fever raged throughout the world. The financial markets is going through the traditionally difficult months of May to August. With trading volume around the world falling due to summer holidays and world cup, the financial markets are much more volatile with the less volume. In the case of June, the volatility is that of downwards. Some of the bad news include US employment rate slowing and continued concerns of the European crisis. After the bailout of Greece, things has been cooled somewhat with less fear in the market compared to May. In Asia, the most significant news is the revaluation of the China Yuan. This will have a mixed impact on a lot of things. Some fear that the rising yuan will erode the competitiveness of China, while other analyst welcome the news as a rising Yuan will slow down the overheating China economy. The stock markets of south east asia, whom China is one of the biggest market for the listed companies, soared on the news as a result of a potential higher profit due to rising yuan. Commodities is going nowhere and is generally in a sidewards trend.
Attached is a list of my commonly recommended fund and the results for the past few months. I have included the best and worst performing fund in 3 months for comparisons.
The best performing fund is SHK recovery fund. This is a hedge fund operated by one of the most famous hedge fund manager in the world, John Paulson, while the worst performing is a emerging Europe fund. Generally, all the European and Energy funds are at the bottom of the heap. With the exception of BRIC fund that I have recommended which has interest in Russia, there is minimal exposure to the European markets in general. Bonds did relatively well in this period of uncertainty but the performance hasn’t been significant better than Asian equities over a longer period of time. Indonesia and gold remains top of the chart with Asia equities placed in the middle of the heap. Winner of the worst Asian equities still goes to China.
To Do or not To Do
There are much interest on what to do as of now with the rumor of a double dip recession and another big crash in stock market in works. The concern is certainly valid but I doubt the scenario will be as bad as some analyst painted. In fact, as of now, there is a possibility that we are already at the starting pt of the recession with the June and third quarter data being negative or flat. In many parts of the western economies, the stock market has dropped more than 20% which constitution as a “Bear Market” which we associated with a recession. My advice remains the same:
1) Stay out of Bonds – Buying into bonds in the short term for fear of a crash in the stock market is certainly not a smart thing to do in the medium to long term. Bonds make profits from the dividends and when interest rates drops. With interest rates at close to zero, you can’t get any lower. This means that your dividends will be close to zero and your chance of capital appreciation is close to zero. The world is still in recovery mode and will not let any Greece or Lehman derail the recovery. So there may be a dip but the market will recover before you know it and you are still stuck in bonds. Recall the days of the equity explosion in May 2009. By the time you realized, it is over.
2) Stick to Asia – Asia is the only shinning spots in the world right now, thanks to overheated China and India. It seems that a slow down of western exports has not deterred the growth of the Asian Markets. South East Asia seems to be the best positioned in this cycle to benefit from both the recovery of the western economies and China. With the spotlight on China and India for the last 10 years, South East Asia may see a renewal of capital influx as China become more expensive to operate.
3) Gold may have a correction – Many people is asking me why don’t I allocate a bigger chunk of allocation to gold since I am so confident of its future. I am all too aware of the volatility of the commodities market in the short term. As the Euro zone recovers, gold demand will drop temporary and prices will fall as the world becomes more confident of euro again. It is already happening with gold prices falling from $1250 to $1200. Just take a look at the gold fund and you will see that the volatility in the short term is astonishing. My confidence in gold prices is in the next 4-6 years. So just ride out the volatility.
4) Give China a chance – China is at the bottom of the performance cycle.. AGAIN! Many investors are now questioning the China stock market miracle. It seems to have fizzled out the is falling everyday. If u imagine China economy is equivalent of US in the 70s where there is a major economic slow down, can you imagine how much more it will run in the future? (Dow is around 700 in the 1970s rising from 150 in the 1950s. It is at 10,000 pts now) Be patient and you will be rewarded when the China frenzy starts again.
So the plan for now? Stay cool, stay detached. There is nothing much that’s going to happen until August when astrologists and Feng Shui Masters predicting a massive correction. Other than another Greece like break down in Europe, a potential nuclear war in Korea and BP potentially getting into trouble leaking millions of dollars every day, there are no other visible threats in the horizon. Not that the threats I mentioned is not bad enough… Meanwhile, our property prices is still defying gravity and shooting higher as the foreign investors park “safe” money in Singapore. We are living in a crazy world!
Attached is a list of my commonly recommended fund and the results for the past few months. I have included the best and worst performing fund in 3 months for comparisons.
The best performing fund is SHK recovery fund. This is a hedge fund operated by one of the most famous hedge fund manager in the world, John Paulson, while the worst performing is a emerging Europe fund. Generally, all the European and Energy funds are at the bottom of the heap. With the exception of BRIC fund that I have recommended which has interest in Russia, there is minimal exposure to the European markets in general. Bonds did relatively well in this period of uncertainty but the performance hasn’t been significant better than Asian equities over a longer period of time. Indonesia and gold remains top of the chart with Asia equities placed in the middle of the heap. Winner of the worst Asian equities still goes to China.To Do or not To Do
There are much interest on what to do as of now with the rumor of a double dip recession and another big crash in stock market in works. The concern is certainly valid but I doubt the scenario will be as bad as some analyst painted. In fact, as of now, there is a possibility that we are already at the starting pt of the recession with the June and third quarter data being negative or flat. In many parts of the western economies, the stock market has dropped more than 20% which constitution as a “Bear Market” which we associated with a recession. My advice remains the same:
1) Stay out of Bonds – Buying into bonds in the short term for fear of a crash in the stock market is certainly not a smart thing to do in the medium to long term. Bonds make profits from the dividends and when interest rates drops. With interest rates at close to zero, you can’t get any lower. This means that your dividends will be close to zero and your chance of capital appreciation is close to zero. The world is still in recovery mode and will not let any Greece or Lehman derail the recovery. So there may be a dip but the market will recover before you know it and you are still stuck in bonds. Recall the days of the equity explosion in May 2009. By the time you realized, it is over.
2) Stick to Asia – Asia is the only shinning spots in the world right now, thanks to overheated China and India. It seems that a slow down of western exports has not deterred the growth of the Asian Markets. South East Asia seems to be the best positioned in this cycle to benefit from both the recovery of the western economies and China. With the spotlight on China and India for the last 10 years, South East Asia may see a renewal of capital influx as China become more expensive to operate.
3) Gold may have a correction – Many people is asking me why don’t I allocate a bigger chunk of allocation to gold since I am so confident of its future. I am all too aware of the volatility of the commodities market in the short term. As the Euro zone recovers, gold demand will drop temporary and prices will fall as the world becomes more confident of euro again. It is already happening with gold prices falling from $1250 to $1200. Just take a look at the gold fund and you will see that the volatility in the short term is astonishing. My confidence in gold prices is in the next 4-6 years. So just ride out the volatility.
4) Give China a chance – China is at the bottom of the performance cycle.. AGAIN! Many investors are now questioning the China stock market miracle. It seems to have fizzled out the is falling everyday. If u imagine China economy is equivalent of US in the 70s where there is a major economic slow down, can you imagine how much more it will run in the future? (Dow is around 700 in the 1970s rising from 150 in the 1950s. It is at 10,000 pts now) Be patient and you will be rewarded when the China frenzy starts again.
So the plan for now? Stay cool, stay detached. There is nothing much that’s going to happen until August when astrologists and Feng Shui Masters predicting a massive correction. Other than another Greece like break down in Europe, a potential nuclear war in Korea and BP potentially getting into trouble leaking millions of dollars every day, there are no other visible threats in the horizon. Not that the threats I mentioned is not bad enough… Meanwhile, our property prices is still defying gravity and shooting higher as the foreign investors park “safe” money in Singapore. We are living in a crazy world!
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