Master Rider Blog

A Tale of Two Markets (II)

November 7th, 2007 NW Teong

I first posted my blog “A Tale of Two Markets” on 16 Oct 2007. When I read it again 10 minutes ago, it is still very relevant. In fact we have seen the events being played out in these two markets, namely those in US vis-à-vis Asia markets. While on one hand you hear lots of concern on the housing problem in US expressed by big names such as Soros, Bill Gross, Alan Greenspan and so on in the past few days, and on the other hand Asia markets continue the bull run best represented by the IPO of hot internet stock, Alibaba.com which was listed in Hong Kong Stock Exchange yesterday. Alibaba.com ‘s share price closed at almost three times its IPO price at the close of its first trading day. Before this news, we have also heard the news of PetroChina becomes the first US trillion dollars company in the whole wide world after it has listed its shares in Shanghai Stock Exchange few days ago. I can only use the word “crazy” to describe the euphoria in both China and Hong Kong markets and to certain extend other markets in Asia too.

Most of the things that I talked about in my previous blogs are being played out now: US$ is weakening, commodity prices have surged and are still surging, crude oil is breaking new record high, same go for gold price, more bad news in US subprime loans, liquidity driven bull run in Asia markets will continue, tech stocks are doing well in US (be more selective) and also present value buy in some Asia markets. Please also read my comment yesterday posted under the blog “A Quick Glance”. So far so good, as I mentioned before, all these will go on until some triggering events occur. For instance, a big blow up of the subprime loan problem in US, crude oil shoots pass US$120 per barrel in a short time, policy risk (US, China and others) or simply an event risk such as a terrorist attack.

In fact, as argued before, US is in an awkward situation, its domestic housing problem has forced Fed to lower interest rates which it would otherwise not willing to do so in view of high commodity price, especially the crude price, potential of higher inflation, weakening of US$ etc. This would expedite the liquidity outflow from US into the emerging markets. It seems like the US markets are asking for more interest rates cut from the Fed. Cut or no cut, this remains to be seen, however, the liquidity bull run in Asia is likely to continue, at least in these two months! Always invest prudently and be very conservative, this is the only way to win big money (and avoid losing money)! For those Master Rider Club members, you would receive a stock recommendation email today. Cheers!

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Entry Filed under: Commodities, Currencies, US Stocks, tech sector, Macro, Singapore