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