Get vaccinated

 8 May 2021

Dear Fellow Investor,

As Singapore moved back to a phase  2 MCO last week the SGX  dropped for 5 straight days. The same happened in the KLSE although there was a slight recovery Thursday and Friday.  The main reasons for new MCOs in Singapore and Malaysia  is the slow rollout of vaccinations and some people ignoring the SOPs.

On a brighter note the SERC (Socio-Economic Research Center) reported in the Sun that although growth is uneven in Malaysia the worst is over for the Malaysian economy. Covid -19 vaccinations are the key to recovery.  Some of my friends and clients especially those in Penang have received their shots.     

The export sector is set to remain strong, on the back of buoyant global demand for semiconductors, rubber products, chemicals, transport equipment, and palm oil products. Last week China imports and exports were reported to be much stronger than expected.

One of my favourite recovery indicators is the price of SATS which is an airline caterer listed in Singapore. Many sovereign wealth funds own this share   They are positioned in Singapore, China, HK, Thailand, Malaysia, India and other Asian countries.  In March 2020 they dropped to SGD 2.60 but  they recovered to SGD 4.50.  Covid spreading in India and renewed MCOs have caused SATS to come off their high at 4.50  but they are holding support at 4.00.   As vaccinations get rolled out  and air travel gets back to normal  expect this share to recover.

I recently invested in Canadian Solar listed in New York. It has been a disappointment as the entire solar space has collapsed.

The main reason for the drop has been the higher yield on 10 year US T bonds rising from 0.93 to at one point 1.73 %

Solar companies get a tailwind from low interest rates because most of their projects are financed through long-term debt offerings, so when rates rise the margins on projects go down, and in some cases they're no longer economical to build at all. In effect, low interest rates are what drive both profit and growth for the industry. 

Also some states  in the US   are  increasing taxes and fees on homeowners who install solar panels.

I chose Canadian Solar because it has international exposure, solid financials and a lower PE ratio than its peers. Because it broke weekly support and closed below its 200 Moving Average for risk management reasons, I reduced our positions.  I like the green energy story as the world is moving in that direction but the market at this time does not agree.  At this time fossil fuels are winning the battle.

Our Singapore financials continue to perform especially DBS and OCBC. This is another positive sign for recovery. If the MAS allows them to raise their dividends expect more upside.

The latest employment numbers released Friday in the US were much worse than expected.  Economists forecasted 1.2 million jobs were created in April 2021 but the number came in at 260 thousand. Gold took a big jump and the US 10 year yield dropped signalling the US authorities would not likely raise interest rates. Markets reacted positively so expect Asian markets to be well supported next week.

Keep safe
Bill

This giraffe was rescued from an island after a flood by a custom built boat. I read that it is unsafe to have the giraffe lie down as it might choke so they have to move him while standing.