As another year draws to a close, I am sending this email out to all my friends and family with wishes for a joyous holiday season. Thank you for choosing UOB Kay Hian, and having me as your broker.
2015 has been a year of unforeseen ups and downs in various markets; equities, commodities and FX. The US rates hike is one of the most anticipated events since Mar this year. Even though US economy has released quite robust economic data over the months, with some scattered negative surprises, Feds has delayed the rate hike again and again. As US Feds has kept pushing the rates lift-off to a later date (3 months later each time), it has added more confusion and uncertainties in the market. We will have our answer this coming Thurs Morning.
Not to mention on the other hand, China's growth has slowed down a little for the first time (around June 2015) and devaluating RMB during the month of August this year, most of the markets got hit badly too. That somewhat contributed to a flash crash on 24 Aug 2015 where there is a lack of liquidity of overwhelming sellers than buyers. On the whole, China's economy is indeed slowing down, and is in the midst of transition transiting from exports, investment and heavy industry to consumption and services. Last Sunday, the trade data released showed that China's activity data was stronger than expected in November, with factory output growth picking up to a five-month high, signalling that a flurry of stimulus measures from Beijing may have put a floor under a fragile economy. Still, China trade data will be closely monitored for market directions.
Lastly, the most recent announcement from ECB (Euro Central Bank) was ECB's smaller than expected stimulus measures,causing stocks to tumble and euro$ to surge. In lay man's terms, EURUSD has been going down about -3% over a period of 6 months, only to rocket up around +3% in merely 4 sec! It is one of the most shocking trading events, swinging from one extreme to another. This serves as a reminder to all that anything can happen during trading hours, especially FX markets.
At the point of writing this email, Singapore STI Index has lost about 500 points, or approx 15 percent during the last 12 months from 3,318.70 points in December 2014. Gone were the days when one can 'safely park money' in any good undervalued counters for capital appreciation and dividend play. If one had adopted the 'buy-and-hold' method, it is not surprising to have incurred (paper or actual) losses for this year. The market in the year of 2015 requires traders/investors to understand the concept of longing and shorting counters to make a better informed decision for the year 2015. This is especially so for those who has SBL (Shares Borrowing and Lending) or CFD (Contract For Difference), who can borrow shares to short quiet and unpopular counters with low or no growth.
With the above statement, many of my friends believed and thought that it is 'easier to make money' by shorting such counters. It is not always the case for some, because during such times, there may be shares buy back by the companies or other speculations too, resulting in margin calls and top ups, making open shorts unprofitable, and very stressful too.
Yet, not all is lost in the midst of doom and gloom. In my views, we can continue to spot for blue chip share, noting the prices along the way. I have been advocating this since the start of 2015, helping some to profit from it too. Blue-chip shares are giant companies with solid reputations such as banking, telcos, transport and property developers. As what I have always shared with my friends using an extreme example, if DBS were to be S$10.00 today, we simply buy some and hold. If DBS were to go lower subsequently, that does not matter at all. Simply because we are buying the shares of a company that is worth investing in. With this simple mentality, it helps to question the rationale of investing in that particular counter, maximizing our chances for greater returns when the market recovers.
Looking forward my 2 cents, I personally see that :
- major global announcements and important economic data by US, China, Euro will be watched closely as usual. In short, major events (trade data, GDP, jobless claims) will continue to overshadow and have bigger impact than micro events (company news, acquisition and etc).
- China should recover gradually and slowly, bringing some hopes in the midst all the negativity now.
- Oil related counters will not improve unless the oil rout is settled, which is very unlikely any time soon.
- While many expected Yellen to announce the rate hike this coming FOMC meeting, please be prepared for any surprises. Personally I hope that the rate hike will be confirmed asap as this will give stock markets a clearer direction. The current market has fallen quite a fair bit and it seems to me that the rate hike has been factored in already; once the hike is confirmed, markets should recover somewhat depending on the latest economic data.
- Volatility in the market is expected, due to the new interest rate environment (assuming confirmed interest rates hike that is). We should be able to buy some really good bluechip stocks at lower prices.
- once the hike is confirmed, I think the market will be concerned about US debts ceiling next
Let's look forward to 2016 and hope that it will be a better market for all.
Happy 2016! And once again, thank you all for your support! Cheers!
This transmission has been issued by a member of the UOB Kay Hian Group for the information of the addressee only and should not be reproduced and/or distributed to any other person. Each page attached hereto must be read in conjunction with any disclaimer which forms part of it. Unless otherwise stated, this transmission is neither an offer nor the solicitation of an offer to sell or purchase any investment. Its comments are based on information obtained from sources believed to be reliable but UOB Kay Hian Group makes no representations and accepts no responsibility or liability as to its completeness or accuracy.
