Rally is narrowly based and focused on technology stocks

30 April 17

Dear Fellow Investor,

In the last year 10 stocks have reflected the rise in the Nasdaq and S & P in the US. This means the rally is narrowly based and focused on technology stocks including Amazon, Google, Facebook and Apple. This is deceptive as the index does not reflect the broader market.  

Valuations are also stretched.

There is value in Hong Kong with a PE of 12 while Singapore is at 14.6. Nasdaq at 25.5 while Malaysia is at 18.4 and that is why I do not recommend main stream KLSE shares which in some cases are overvalued. 


We have an advantage in investing in under researched smaller to mid cap Malaysian companies as they are too small for the large funds to invest. Valuations are more reasonable but we have to do the hard on the ground research to find them. I travel each month to Singapore in search of these companies for our PGWA accounts and lesser traveled places in Malaysia for our EPF and cash accounts.


I do not recommend to buy most China shares due to compliance issues and lack of transparency so I focus on Hong Kong. Hong Kong is a good proxy for China, Singapore as well. Hong Kong is so strict even Ali Baba could not list in Hong Kong but listed in the US.

The U.S. economy isn’t looking as strong as you might think. Surveys of consumer and business sentiment – that is, how people “feel about” their economic situation – are upbeat. That’s important, and it matters for future growth. But what’s more important is underlying economic trends. And those aren’t so sunny.



For example, retail sales – how much stuff Americans buy – have fallen over the past two months. This is the first time in more than two years that this has happened. Monthly auto sales have dropped nearly 10 percent since December. Economists are cutting their growth forecasts for 2017.

The US Purchasing Managers Index for manufacturing, which measures the activity level of purchasing managers in the manufacturing sector, has been falling this year. Other surveys suggest that the pace of hiring has slowed and manufacturing cost inputs have increased sharply.

Also, President Trump can’t seem to get much done which is not his fault because of congress and special interests 

Look to China instead

The real economic excitement is across the Pacific, in China. 

China’s economy is strong – and far stronger than a lot of people think. Chinese stocks are positioned to do a lot better than U.S. stocks.

The economy is growing nicely. China’s Manufacturing PMI (purchasing managers index) has been steadily rising for more than a year now. Annual industrial production has accelerated so far this year, from year-on-year growth of 6 percent to 7.6 percent recently.

Manufacturing and industrial production growth are both indicators of strong economic growth.

Power production is one of the more reliable economic indicators in China (it’s hard to massage the data). Even the Premier Li Keqiang, the head of the Chinese government and the number two behind President Xi Jinping, has said that he looks at electricity production and transport data as his key indicators of the economy. Power production fell in China for almost two years leading up to August of 2016. But now it’s growing at a healthy 6 to 7 percent annually.

Another reliable data set preferred by Premier Li is railway freight volumes. Railway freight, which reflects the gross weight of cargo transported, grew 19 percent in February over the previous year. That’s a big change from the last quarter of 2015, when it fell 15 percent. A similar indicator, container throughput, grew 8 percent in March for China’s ports. It was flat a year ago.

It follows that trade volumes are also up. Year-on-year exports were up 16 percent, comfortably beating estimates of just 3.2 percent.

Bullish China, China's economy is strong, and the equity markets in Hong Kong, Singapore- Asia in general are beginning to reflect this. Economic growth provides the foundation for hiring, spending and investment.


As a result, we’ve seen H-Shares, Chinese stocks listed in Hong Kong, return 9.3 percent this year versus 6.7 percent for the S&P 500 index.

StansburyChurchouse research

Invest well and Grow Your Wealth, Bill

Can Trump break the chain so the eagle can fly ? This cartoon reflects most countries in the world- Europe, Japan, US . The liberals, socialists will do all in their power to hold back their economies with more regulations and taxes. They want a stronger chain and a heavier ball. Britain broke the chain with Brixit and look at the result. A super strong economy- more jobs, more progress and more investment.