Bull Market is Healthy But Do Take Some Profits (Part 1)

The rally has gone on for over a month. During this period, Straits Times Index rose by over 8%. Elsewhere in ASEAN, the rally is fiercer. The Jakarta Composite rose by over 16%, Philippines around 20%, Thailand 12%, Malaysia 15%. Across the western world, monetary easing has led to central banks buying up government bonds across all tenors, bringing down yields to record levels, causing sovereign bonds to rally. A lot of institutions have taken profit from these bonds, knowing that if they held assets like US Treasuries any longer, prices will eventually fall. QE means an opportunity to take profit at the expense of central banks' printing press.

With no where to put their money, institutions in the west are flooding Asia ex Japan, and emerging markets with billions of dollars. The money primarily flowed to emerging Asia and commodity exporting countries like Brazil, Qatar, Russia, Australia, Indonesia etc. In the new world order, stock market performance will be as such:

1. Best performers: Emerging Markets that are commodity exporting: e.g. Russia (8x historical PE only, oil, gas, coal), Brazil (17x historical PE, oil, gas, steel, agriculture), Indonesia (30x PE, coal, agriculture), Venezuela, Mexico, Chile, South Africa, Gulf states that produce oil etc.

2. Second best performers: Emerging Markets that are partially commodity exporting, partially commodity importing, but are driven by large domestic consumption: e.g. China (exports gold, rare earth, imports oil), India (exports steel, imports food, oil), Turkey, Malaysia, Thailand, Philippines etc.

3. Second tier performers also: Developed countries that are primarily exporters of commodities: e.g. Australia and Canada.

4. Third tier performers: Developing Emerging Markets with no large domestic demand, primarily importing commodities, e.g. Singapore, Israel, Hong Kong.

5. Fourth tier performers (second worst): Large developed countries which export some commodities but import more. E.g. the US and Britain.

6. Worst performers: Developed countries that primarily import commodities, e.g. Japan, the EU.