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| Turkey - The next economic star of Europe |
The small dribble of selling that started during the last week of May, turned into a flood gates, as hot money fled from the global equities market. Even the US stock market, which is the most defensive and resilient of this exodus, also got knocked down quite a bit. However, the US stock market performed relatively much better as compared to the emerging market equities, thanks to the stronger USD and the recovering US economy. The US S&P500 fell 3.15% as compared to MSCI Emerging Market Index which fell 12.77% based on one month performance. Bond funds fell across the board due to the shock of a sharp rise in US Treasury yields and the fall is pretty uniform across all the bond funds by around 3%, with emerging market bond funds faring the worst.
Our allocation with 40% US & 30% Singapore Government Bonds managed to minimize the impact of the sharp fall of emerging market equities, as we were previously almost 70% invested into emerging market equities.
In view of the sharp correction in the emerging market spectrum, I have decided to move half of the bond fund into some very attractive emerging markets.
1) Thailand
I wanted to invest into Thailand last year, during the peak of the Euro financial crisis. However, I picked Malaysia, as a more defensive choice, and saw the returns of the Thai Stock Market outstripped the Malaysian stock market by a huge margin. This time round, I will not make the same mistake and decided to be more aggressive this time round, given that the global economy is more certain than last time around. The Thailand stock market has fallen almost 13%, as compared to the 6% of the Malaysian stock market. It comes as no surprise, given how fast hot money comes and goes.
2) Turkey
This is a hard choice. I have been observing the Turkish stock market for some time, and the recent knock down due to the huge anti government protests, and the market shock from the Fed announcement of the tapering of the QE, turned one of the best performer in the global stock market into one of the worst. The Turkish stock market fell by 18%.
Turkey is one of the emerging stars in Europe, and survived the Euro crisis pretty much intact. Despite the huge protest, the current government has been very popular as it managed to navigate the country through the worst of the Euro Financial Crisis. I see a parallel between Turkey and Thailand, whereby they are potential economic stars who went through some difficult times in the political arena. Should the scenario play out as how it is in Thailand, the turkey fund should yield pretty decent returns.
Here are some interesting articles on Turkey:
Into the Darkness
I have absolutely no idea how much more the market will fall from here, but I will adopt a similar strategy which I have employed last year. allocating in tranches the bond fund into markets with great potential. This time around, I will be allocating half of the bond fund into these funds, which is approximately 15% of the portfolio size. Due to the limitation of the CPF-OA fund universe, I am again, unable to allocation them into any Turkey funds. So I will be allocating the cash investment into HGIF Turkey Equity Fund while for CPF-OA, Aberdeen Thailand Equity Fund.
My Market Correction Promotion is still on-going if you invest between now till 31st July, and enjoy a 0% front end advisory charge (Usual at 2.8%). Refer to your email which I have sent you for more details. Take this opportunity to invest while the market is cheap!
Please feel to contact me if you have any queries.
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