2017 is coming, Merry Xmas & Happy Prosperous New Year

 

17 Dec 2016

Dear Fellow Investor,

We wish all of you a Happy Christmas and a prosperous New Year

What’s in store for 2017 ?

2017 will be a continuation of 2016.  The list of fears and uncertainties include Brixit, Donald Trump impact on markets, the US Federal Reserve interest rate policies, unemployment in most of the developed world, deflation, inflation, financial bubbles, stock overvaluation, political uncertainties, bond collapse world wide etc. This will create up and down volatility. 

Over 15 trillion equivalent USD has been printed world wide and placed in equities, property and bonds because low and negative interest rates have forced investors into speculative assets.

All of these issues magnify volatility and create massive price swings in the market. Media talking heads on Bloomberg and CNBC incite fear and panic creating more volatility.   

The focus of 2017 will be Federal Reserve watching. When will they raise rates ? This will keep the markets on edge and increase volatility.

How do we survive in this environment ?  Keep calm, focus on quality companies that have a history of rising dividends. Understand what you are investing in. Make sure they have quality management with a proven track record.  

By reviewing their financials you can know that they have  sustainable earnings and growth, low or no debt and increasing cash flow.

In 2017 we will be visiting  companies in Singapore/ Malaysia to find opportunities and meet these criteria .  We have a few on our radar screen that fit.

From 19- 26 December, I will be in Vietnam on holiday and for 1 investment briefing on the Vietnam market but I will check my email every evening for any  questions or issues you might have. 

You may call Linda, Nora or Idza, at our customer service at 03 2783 0300 for administrative questions or  Ashley/ Jeffrey at our dealing desk  03 2166 8099.

Invest well and grow your wealth,

Bill

Bank Negara Policy Change

12 Dec 2016

Dear Fellow Investor,

Expect the KLSE to tread water next week as investors gauge the impact of the Bank Negara policies to stabilize the RM. 

The onshore and offshore RM rates narrowed considerably dropping from over 10 % premium to less than 1 %. This shows that fear/ panic  have subsided.

Due to the Bank Negara policy change there was panic selling in exporters and the rubber glove sector, and in particular Kossan and Riverstone which we hold. I called investor relations in these 2 companies and they explained to me why there would be minimal impact.  There was a some recovery as professional investors supported these shares.

Weekly KLSE showing congestion since October 2015.

 

Despite the fear, uncertainty, loss of confidence etc, the KLSE did not collapse and in fact had a mild up move.  Foreign funds were in fact small net buyers on Friday.

The fundamentals that drive a share or market are generally not known before a move begins. Once they are known by Joe Public the market has already moved. That is why we buy quality value shares when they are offered at reasonable prices and hold for gain. We watch volume and price (IVSA)  to get an early entry. 

The fundamental that has not been discounted in Asia is the Trump effect.  Investors in the US have driven up the Dow/ Nasdaq and S & P to new highs as the surprise election of Trump will be positive for growth, earnings, business and high wage jobs.  

Job and business destroying regulations will be cut. Taxes across the boards will be cut.  The US has the highest capital gains taxes in the world and Trump will massively lower them.  Fiscal stimulus will be used to stimulate growth. 

The world is awakening to these new policies. Asian stock markets will rally. Exporters will benefit.  

Singapore banks and blue chip stocks, as I mentioned last week are awakening from their long hibernation.  

Trump has constructed a cabinet with practical billionaire businessmen who know how to make money. I am not worried that he will shoot himself in the foot by placing large tariffs on China,  and Asian countries His advisers will make sure he does not act out of impulse. He is a pragmatist and pro business; not an idealist out of touch politician trying to change the world.  

Do check out this link to an interesting seminar by my friend Lee Cheng Hooi http://mnsglo.com/?event=traders-tavern-kl-9&event_date=2016-12-13#register .  He is a financial writer for the Edge and a prominent analyst. 

Invest well and grow your wealth,
 

Bill

An African bull elephant

 

Banking is the leader indicator of market and economic recovery

3 Dec 2016

Dear Fellow Investor,

A leading indicator of market and economic recovery is banking. 

With commodity price inflation and the rise in interest rates in the US, banks are rising.  Singapore banks are moving up as Singapore interest rates are correlated to rising  US rates.

Weekly chart of OCBC with price breakout on high volume from 7 months of congestion

 

Donald Trump will deliver on infrastructure growth , tax cuts and the elimination of thousands of business destroying regulations. 

Initially, this will put upward pressure on inflation and interest rates and should be positive on the shares we hold for you which are able to raise their prices with inflation. Of course, Should inflation start to explode we will have to adjust our position.

OCBC is one of our core holdings in our PGWA accounts. We have waited patiently through the congestion collecting generous share and cash dividends . We have closed our ears to the onslaught of bad news, negative analyst reports and  recession fears.  

OCBC was founded in 1932 and survived the Japanese occupation, a world war, countless recessions, panics, crashes, the Pan El crises and the 2008 financial disaster. They are still standing and getting stronger. 

OCBC will benefit with higher commodities such as crude oil and will ease pressure on their relatively low NPLs .  ( Less than 1.0 % based on their last quarterly report) 

I am bullish commodities and this relates to China. The Shanghai Futures Exchange turned over 944 million contracts in 2015 while the Chicago Mercantile Exchange turned 462 million contracts.  

China’s Commodity Markets – dictating world prices; trading Volume has exploded; It is clear that China is already playing a greater role in the Asia-Pacific region, as a result of the US pulling out of the Trans-Pacific Partnership (TPP) As the US pulls out of TPP, there will clearly be a large strategic opportunity for China to further enhance its role in the Asian economy and beyond. Shanghai is increasing its role as a center of trade and finance in Asia; and the Chinese yuan is increasingly used as the currency for trade transactions. China’s futures markets have also become key trend setters, given their sheer magnitude of trading volume. Billions of contracts trade on the mainland’s 4-exchanges with volume spread among 38 physical commodities and 5 financial futures.   

Gary Dorsch, Global Money Trends

This China presence will benefit Asian markets including Malaysia, Thailand,  Indonesia and Singapore.

PM Najib just made a multi- million dollar infrastructure deal with the Chinese which will bring growth and business to Malaysia. I hope he teams up with Trump. 

Do not listen to the protectionist rhetoric of Donald Trump. That was to get elected.  Now he will govern. He is putting together a team of billionaires who know how to make money. 

He knows the benefit of trade and knows how to deal and create wealth .   What a breath of fresh air compared to the socialist, anti business attitudes of Obama, Hillary and their ilk.       

Invest well and grow your wealth

Bill