It is now May and we have reached the "Sell In May And Go Away" period. Of the 26 sectors / indices that I measure, 7 are SELLS (Emerging Markets, Russia, Thailand, Indonesia, Singapore, Global Real Estate, European Real Estate). 4 STRONG BUYS (China, Mining, Tech and US Financials), and 3 ACCUMULATE (between 15 - 20% upside in one year) (US, Global Financials and European Financials).
Earning are still rising in many countries, especially in the US. Despite the record high levels, US stocks are in general still in ACCUMULATE territory.
Asia and EM stocks do not look ready to invest, because the monetary scores are horrendous. As the US continues to taper by USD10 billion every quarter, the QE from Japan and UK cannot cover the gap. The liquidity outflow from Russia, Indonesia and India has caused their yield curves to invert. This means that the three economies could face a slow down or even a contraction of their GDP in 2015. My thesis remains this: Asia and Emerging Markets are still in treacherous times because of the liquidity outflow. Real estate prices are also at record high in many cities, e.g. Bangkok, KL, Singapore, Jakarta, Beijing, Shanghai and Manila. Governments are struggling to contain cost of living increases and are unable to lower short term rates to boost the economies.
I particularly dislike Singapore equities. Singapore is a small and vulnerable nation. For the past 50 years, we have relied on population growth, cheap foreign labour and MNCs to boost the economy. But there is a limit to the population growth. There won't be room for more people soon and the adverse impact of over crowding (e.g. poor morale, overly stressed workers, creaking infrastructure, small homes, poor physical and mental health) will outweigh the economic benefits. MNCs cannot be relied on to provide good jobs for citizens as their preoccupation is to maximise profits and increase productivity via automation. There are very few home grown MNCs as the government failed to promote local leadership who can bring our SMEs to the next level.
Cyclicals continue to indicate outperformance. I particularly like tech (internet related stocks), mining and banking.
It is time to take some profits off global stocks. You can probably find better return to risk ratios by trading bonds which give around 5 - 7% for SGD. Stock markets this year is unlikely to give us more than double digits so bonds should be the preferred choice. EM / Asian bonds could be a better bet for now.
Earning are still rising in many countries, especially in the US. Despite the record high levels, US stocks are in general still in ACCUMULATE territory.
Asia and EM stocks do not look ready to invest, because the monetary scores are horrendous. As the US continues to taper by USD10 billion every quarter, the QE from Japan and UK cannot cover the gap. The liquidity outflow from Russia, Indonesia and India has caused their yield curves to invert. This means that the three economies could face a slow down or even a contraction of their GDP in 2015. My thesis remains this: Asia and Emerging Markets are still in treacherous times because of the liquidity outflow. Real estate prices are also at record high in many cities, e.g. Bangkok, KL, Singapore, Jakarta, Beijing, Shanghai and Manila. Governments are struggling to contain cost of living increases and are unable to lower short term rates to boost the economies.
I particularly dislike Singapore equities. Singapore is a small and vulnerable nation. For the past 50 years, we have relied on population growth, cheap foreign labour and MNCs to boost the economy. But there is a limit to the population growth. There won't be room for more people soon and the adverse impact of over crowding (e.g. poor morale, overly stressed workers, creaking infrastructure, small homes, poor physical and mental health) will outweigh the economic benefits. MNCs cannot be relied on to provide good jobs for citizens as their preoccupation is to maximise profits and increase productivity via automation. There are very few home grown MNCs as the government failed to promote local leadership who can bring our SMEs to the next level.
Cyclicals continue to indicate outperformance. I particularly like tech (internet related stocks), mining and banking.
It is time to take some profits off global stocks. You can probably find better return to risk ratios by trading bonds which give around 5 - 7% for SGD. Stock markets this year is unlikely to give us more than double digits so bonds should be the preferred choice. EM / Asian bonds could be a better bet for now.
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