12 Jan 2019
Dear Fellow Investor,
Today I attended a stock market outlook by Mr Phua Lee Kirk strategist for Phillip Capital Management.
He explained the on going impact of the current trade war on shares and markets between China and the US.
Bottom line he said there will be no quick and clear end to the trade war because of the hidden agenda behind the trade war. This will cause range trading and high volatility for the next few months. Look for under valued shares with strong financials and these could be growth as well as value shares or a combination of both.
We need to pick individual shares rather than sectors. Range trading of stock index futures such as the SGX or CI futures should be very rewarding
The hidden agenda is power and economic influence:
The Thucydides Trap
Thucydides Trap. Thucydides Trap refers to when a rising power causes fear in an established power which escalates toward war. Thucydides wrote: "What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta."
As China grows, they are expanding their belt and road project, their military presence in the South China Sea. economic influence in most Asian countries including Africa, Malaysia and Thailand, 5G technology as well as threatening a Taiwan invasion.
This has led to the rise of trade and military hawks to power in Trump’s administration.
China can afford to wait. They have a president for life while Trump faces election in 2 years. China hopes they can get rid of Trump.
Trump is smart enough to avoid an escalation of trade war or a shooting war. He will overrule his advisers, the war and trade hawks and the socialists like Schumer and Pelosi and find a compromise to keep power, make a deal with China and keep his job in the upcoming election in 2020. This will benefit all parties.
A real war between China and the US benefits no one. Now they are posturing and bluffing to gain an advantage. Upward of 350 million people would die should China invade Taiwan according to the Economist, stocks would collapse world wide and there would be a world wide depression.
This is a highly unlikely scenario.
The 24 hour news cycle constantly stirs the pot to stir up fear and uncertainty. As I mentioned in last weeks report, we must put wax in our ears to turn off the news.
Mr Phua mentioned that the Malaysia market has limited downside due to the lowest foreign fund participation of any Asian market. Foreign funds can not sell what they do not own. The recent strengthening of the ringgit supports that the KLSE is stabilizing.
He also mentioned no recession in 2019.
China is now in their 70th anniversary of the new China when the communist party was formed after WW2
President Xi to save face will do all in his power to make sure of a strong economy This includes lower interest rates, property market support and lower reserve requirements.
This will indirectly benefit all Asian markets.
This was only a part of Mr Phua’s outlook. If you have any questions please let me know and I will ask him for you.
Invest well and grow your wealth, Bill
Today’s miracle of nature is :a slipper orchid sighted in a vegetable market in Laos.
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