Is the Worst over for Asian Stocks?

11 Sept 2020

Dear Fellow Investor,

Is the Worst over for Asian Stocks? Last week I was waiting at the taxi stand across from the KLCC. It began to heavily rain and I resigned myself for a long wait.  As luck was favouring me, a taxi soon stopped. Usually when it rains there are few taxis on the road.  The driver told me that his business improved during the rain. He did not have much competition. I complemented the driver for being out on the road during the severe storm   Most drivers will wait for the rain to stop just like most investors who will stay out the market during times of uncertainty. As Warren Buffet would say we  pay a high price for a cheery consensus.   Is the worst over? Many economist and investors are pessimistic and negative. The crowd view is that the glass is half empty rather than half full.    On a positive note, Asian economies are coming back to life.  Restaurants see more customer traffic.  Mall business is picking up. Airlines passenger loads are increasing. Covid death and infection rates are decreasing. Progress is being made on a covid vaccine. There are fears about the November election in the US but this should not effect the shares we hold.  If Biden wins he is on record that he will raise taxes and increase regulations, this will slow America down and Asia will benefit. If Trump wins he promises to lower taxes and  stock markets will benefit. Asia wins either way. Short term expect volatility. The opposition party in the US is blocking fiscal stimulus to the unemployed to hurt Trump. This is causing a market correction. They have blocked business protection loans as well as personal stimulus payments. I think they will be punished by voters in November and Trump will win. Weekly UST which represents a basket of 7-10 year US Treasury bonds. The UST is the benchmark for interest rates world wide. As long as this index is stable world stocks will not collapse.  It defines the central bank policy of low interest rates. Gold and precious metals continue to be well supported which also reflects the massive liquidity pumped into world markets. Equities are the only game in town but we still need to be selective and avoid popular crowd favourites such as Google, Facebook, Apple, Tesla, Amazon etc. I am looking at Japan and Vietnam for under valued opportunities, I will share my research next week on these markets.    Now is a good time to visit the Taiping Lake gardens. No overseas tourists, no crowds, no Covid, and very reasonable prices. Dolly and I plan a visit.