Archive for October, 2007
US dollar is weak against almost all major currencies in the world. Please see the charts for Singapore $ per US$ and Euro per US$, the US$ is at historical low vis-à-vis these currencies.
Courtesy of Yahoo Finance
This weakness of US$ is exacerbated by the aggressive cut in interest rates by the US Fed on the 18 of Sept 2007. The repercussion of a weak US$ could prompt more capital flights out of USA. All things being equal, investors do not wish to invest in a market where the currency is weakening against its home or base currency, let alone US economy is slowing down. This is in sharp contrast as compared to markets in the Asia Pacific region such as China, India, Hong Kong, Korea, Singapore, Vietnam, Malaysia and so on. These economies in Asia are enjoying respectable growth with robust domestic demand as well as higher intra-regional trades. This has already translated into higher returns in the stock markets in these countries. In fact, many of these stock markets as represented by their respective indices have already reached historical records. The added bonus is the strengthening of local currencies vis-à-vis the US$. Hence for investors with US$ as base currency, it will register added return due to the forex gain.
However, the caveat here is that so long as the weakening process is gradual then it is fine. A sudden collapse of US$ would be disastrous to world financial system and hence world economy. A report showed that foreigners now hold slightly more than US$2 trillion of US assets with the bulk of it in Treasurys held by central bankers in Asia. These powerful Asian central bankers are keen to diversify its portfolio away from US assets and they have more incentive to do so now that US$ is weakening and is slated to weaken more. In short, a capital flight away from US markets is already happening, it is a matter of degree. Thus, it pays to monitor how this is being played out in the next few months or even years.
We have to take note that a gradual weakening of US$ would be positive for emerging stock markets as the funds continue to flow into these region. However, a sharp fall in US$ will create panic among global investors that they will sell out their equity portfolios in favour of government bonds, i.e. a classical of fight to safety. With this as a backdrop, US Fed is really at a cross junction at the moment. A potential credit squeeze and a slow down in economy necessitate a cut in interest rates, however a weak US$ calls for a steady or a hike of interest rates. Personally, I feel that the US Fed does not need to cut its Fed funds rate at its next FOMC meeting which is scheduled on 30/31 Oct 2007. Investors who buy shares with the hope of further rates cut are likely to disappoint. Just like in a healthy diet, what one is looking for is a well balanced diet and I am sure the US Fed will try to seek the best possible balance in its interest rates policy.
Whatever the interest rates policy, the stock markets in the Asia Pacific region are likely to enjoy their bullish run, at least till the end of the year albeit unforeseen circumstances. (Caution: We are exactly two weeks away from the anniversary of Black Monday.) Cheers!
Master “The Essence of Stock Investment” and ride towards the journey of your financial freedom to be the “Master of Your Own Destiny”!
Disclaimer: Investors are investing at your own risk. Please read full disclaimer at the end of the blog or from the main page of the website.
October 5th, 2007
NW Teong
People at Raffles Place are just crazy about all these red balls of various sizes being displayed on the turf above Raffles Place MRT station in Singapore. The time for the display is at random and the balls are for the public to take and bring home. No wonder you see many workers, cleaners, staffs, bosses etc come ready to grab the balls. Some come equipped with the big black trash bags! According to my source, there will be a display of these red balls at around 11am on top of Raffles Place MRT station today.
For your information, the display of these red balls is part of the advertisement programme by OCBC Bank, one of the three major local banks in Singapore. It basically tries to arouse people curiosity about all these red balls and of course get attracted by them. For those who wish to grab one or two red balls, you may wish to wait on top of the Raffles Place MRT station today at around 11am. Watch out for latest info: next week venue will not be at Raffles Place where it has been the venue for the past one week. Hint: you may wish to wait at the twin-blade towers along beach road (you should know which building I am referring to!) on 8 Oct.
Seeing red sometimes gives one a very nice feeling, a feeling of festive mood, at least this is so for me. Cheers!
Master “The Essence of Stock Investment” and ride towards the journey of your financial freedom to be the “Master of Your Own Destiny”!
Disclaimer: Investors are investing at your own risk. Please read full disclaimer at the end of the blog or from the main page of the website.
October 5th, 2007
NW Teong
I have mentioned about this index as one of the leading indicators for world economy on my blog “Baltic Index” dated 14 Sept 2007. It has since surged from about 8300 on 14 Sept to 9561 yesterday, i.e. a surge of about another 15% in a space of less than three weeks! Please see the chart below:-
Courtesy of Yahoo Finance
Of course, this huge surge is partly due to the aggressive cut in the interest rates by the US Fed. All things being equal, a cut in US interest rates would translate to a weaker US$, which would translate to a higher prices in all commodities and freight prices where they are mostly quoted in US$. As a powerful leading indicator of world economy, a continued surge in this index tells me that the world economy remains buoyant. This is a strong indicator and good news to all shipping companies as well as commodities related industries.
After rising strongly since 17 Aug, as mentioned in my yesterday’s blog, regional markets are likely to take a pause to digest the gains so far. I reckon markets will gyrate in their usual manners in the next few days if there are no price-moving news. In short, markets could be pretty “boring” in the next few days. Perhaps, it is time to take a break and relax a little and watch how the markets play out in the next few days before we fine tune our portfolio for the final harvest in the last quarter of the year! Cheers!
Master “The Essence of Stock Investment” and ride towards the journey of your financial freedom to be the “Master of Your Own Destiny”!
Disclaimer: Investors are investing at your own risk. Please read full disclaimer at the end of the blog or from the main page of the website.
October 4th, 2007
NW Teong
Most stock markets such as Hong Kong (Hang Seng Index), Singapore (Straits Times Index), Korea (KOSPI), and of course the hottest markets such as China (Shanghai Stock Exchange Composite Index) and India (SENSEX index) in Asia have continued to sizzle. It seems that every day is a new record!
Having risen substantially since its recent low on 17 Aug, I would think that regional markets are likely to pause for a while to digest the gains made so far. Mind you, it is really a hefty gain since 17 Aug 07. This is the time for the more prudent investors to sit down to think of how to re-balance their portfolio and ride on the wave toward the end of the year. For those who are still keen to rush into the markets, I would urge them to be cautious at this juncture as markets are likely to take a pause. This is so especially if the markets continue to go up in the next couple of days. For those who are fully invested, perhaps it is time to take some money off the table. My personal view is simply based on following few points:- 1) valuation is getting rich with the surge in price since 17 Aug 2007, 2) while sentiment is positive due to lower interest rates, fundamental (such as business conditions and economy forecast) remains almost the same since 17 Aug, 3) technically markets are near its critical level soon (e.g. STI will face tough resistance nearer to 3950 to 4000, it is currently at 3835, i.e. about 3% from there!), 4) last but not least, better be careful as we are in the “jinx” month of October (hahaha! You might call this superstitious but being human beings sometimes we are more fearful of the shadow than the actual devil itself).
Having said that, I am still optimistic that final quarter would still be a quarter for a sweet harvest, this of course subject to how markets being played out in October. You see, we can have certain expectation for the final quarter but we still need to monitor the markets movements, valuation of stocks, events etc to fine tune our expectation along the way. This is the essence of a dynamic investment system. In short, manage your portfolio actively to maximize your returns in every twist and turn of the market whenever possible. Cheers!
Master “The Essence of Stock Investment” and ride towards the journey of your financial freedom to be the “Master of Your Own Destiny”!
Disclaimer: Investors are investing at your own risk. Please read full disclaimer at the end of the blog or from the main page of the website.
October 3rd, 2007
NW Teong
Global stock markets have continued to rise as expected and Dow and Nasdaq have just broken their recent peak registered in the middle of July to close at 14,087.55 and 2740.99 respectively yesterday. Please see the charts below:-
Courtesy of Yahoo Finance
Regional markets such as Singapore, Hong Kong and other Asia markets are expected to surge in tandem and in fact have more reasons to surge as the domestic economies are still very strong as compared to that of US. This together with the formation of various funds in China which tapped the domestic money to invest in overseas markets such as Hong Kong, Singapore and so on would add fuel to the fire. No wonder the markets in the entire Asia, especially Hong Kong and Singapore are red hot at the moment.
If you look back on what had happened on 17 Aug where regional markets suffered a huge fall, it was merely a blip in a bull market (For those who have just read my blogs recently, you may wish to read my blog on 17 Aug, titled “Ignore This @ Your Own Risk”). However, we should not just ignore the cause for the panic as the sub-prime loan saga at that time can really go either way. While I did not say that this problem is over, it is at least being contained at the moment. The aggressive cut of interest rates by US Fed obviously has done a good job to address the sub-prime problem to certain extend. As to how much it has really helped is arguable but it has at least help to boost the investors and consumers confidence. The best news for businessmen in other sectors is that with a lower interest rate, it means that their cost of doing business is now lower than before and this is very positive to those sectors that already enjoyed good growth.
A lower interest rates regime would be extremely stimulating for emerging markets as the domestic economy already busting with activities. Take Singapore market for instance, the property sector is growing at double digits and the GDP is expected to grow at the high end of 6% to 9% for 2007. This bullish view has already reflected in the record high of the Singapore Straits Times Index. To top it all, liquidity is every where. Yes, we have abundant of liquidity and the scenario that I have just described merely gives investors a good reason (or excuse?) to buy up the markets! If markets continue to surge for the next 1-2 weeks, watch out when we are nearer 19 Oct. Other than a speed bump on 19 Oct, we should have a relatively smooth ride toward the end of the year, of course albeit unforeseen circumstances. Oh yes, also watch out for the next FOMC meeting on 30-31 of Oct.
Continue to ride on this liquidity play and perhaps have a good harvest at the end of the year. Cheers!
Master “The Essence of Stock Investment” and ride towards the journey of your financial freedom to be the “Master of Your Own Destiny”!
Disclaimer: Investors are investing at your own risk. Please read full disclaimer at the end of the blog or from the main page of the website.
October 2nd, 2007
NW Teong
As mentioned in my blogs last week, regional stock markets are expected to fly in view of renew confidence in the stock markets as well as a surge of liquidity. Please see the charts for STI and HSI as follows:
The official formation of a giant fund by the China government, the China Investment Corporation with deep pocket to the tune of US$200b which is slated to invest in regional markets has further spurred this optimism in the markets. This coupled with the gradual (but surely) opening of the door for local Chinese to invest in overseas markets has provided the icing of the cake for investors to rush in to ride on this huge liquidity surge (a tsunami in different sense). If you recall my Master Rider Investment Philosophy, “Stock investing is just like surfing. You need to choose the right location (i.e. the right stock) and the right time to go in. More importantly, you need to be disciplined and skillful in wielding your knowledge and experience to ride the waves in order to have maximum fun (i.e. profits)!” This is precisely what investors think they are doing, positioned themselves well for a big splash throughout this final quarter of year 2007.
While enjoying the fun, we have to be mindful of event risk. October would still be a volatile month as far as equity is concerned. However, other than October, final quarter has historically produced the best returns as compared to other quarters of a year. Wishing all of you a bumper crops in this final quarter of 2007! Cheers!
Master “The Essence of Stock Investment” and ride towards the journey of your financial freedom to be the “Master of Your Own Destiny”!
Disclaimer: Investors are investing at your own risk. Please read full disclaimer at the end of the blog or from the main page of the website.
October 1st, 2007
NW Teong
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