Recovery Continues

21 November  2020

Dear Fellow Investor,

Recovery Continues

According to Bank Negara, real GDP  growth in the 3^rd quarter 2020 came in at -2.7 % which beat the consensus estimates of -4.1 %

Based on BNM charts documenting recovery since the pandemic started in January 1920, wholesale and retail trade, industrial production, gross exports, manufacturing PMI, and electricity generation have recovered.  Credit card spending is still 16 % below January 2020 levels.

Uncertainty about the budget being approved by parliament on 25 November is keeping the KLSE in a holding pattern.

Looking beyond the short term, the finance ministry forecasted Malaysia’s growth  in 2021 to be 6.5 to 7.5 % .

Covid continues to dominate the news cycle. Infections are spreading world wide while death rates are declining.  Governments are imposing lockdowns which effect business and employment. However;  major advances in therapeutics and vaccines are evolving so on balance expect recovery.

Last week, I reviewed our investment in SATS, a Singapore airline caterer. This is a lead indicator of Asian market recovery as their business leverages on airlines and logistics.  One investment moat they have is the licensed cold chains to deliver Covid vaccines which require -79 C  temperatures for safe shipment. 

On Friday the share price closed @ Sgd 4.17 up from the panic low of 2.62 in May 2020.

Asian banks are also recovering from 20 year price to book lows despite the pessimism and fear. OCBC has risen from Sgd 7.81 in May 2020 to Sgd 9.96 on Friday.

High quality value shares are recovering in most markets amidst the backdrop of low interest rates, anticipation of more economic stimulus and massive cash sitting in money market funds earning a yield less than inflation.  I  read in the US there is over 7 trillion USD in these money funds. This could be fuel for a 2021 recovery.  Combine all of that with a Covid vaccine and the odds favour the bulls. Even Warren Buffet, the king of value investors  is buying undervalued shares in Japan for his Berkshire fund.  

Keep safe
Bill

It is now legal to walk your dog in Adelaide Australia after a long dog walking lockdown.   Hopefully Australia will open up soon . Lots of investment opportunities including resource companies are there.

Waiting for his walk.