Recovery Delayed

 15 May 2021

Dear Fellow Investor,

Here's wishing all our Muslim readers Selamat Hari Raya Aidilfitri!

Recovery delayed

Early last week saw price pullbacks in most equity markets. This was in part due to  Covid fears, renewed MCOs and fears of inflation due to rising commodity prices coupled with massive stimulus.  Growth and technology shares were  hit  because of fears of rising interest rates that squeeze the profit margins and future earnings of higher leveraged companies.

However; technology is still a preferred sector as Malaysian and Singapore exports continue to increase. The whole world is being driven by  innovation, robotics, automation, artificial intelligence and disruption.  Malaysian  technology shares benefit from these unstoppable trends. Companies  in this space continue to show positive earnings growth.

And because of this there has been heavy insider and institutional buying of Malaysian technology shares on the recent price correction.  

Our portfolios have experienced volatility but we will get through this as the winds of stimulus, low interest rates and vaccination rollouts will benefit our quality investments.

 

Fears of inflation

On Friday, the US 10 year treasury bond fell after retail sales  fell. Employment data contrary to most analysts is also coming in weaker than expected.  Because of that equities rallied strongly .   

The 10 year US T Bond yield is the benchmark of interest rates for the whole world. That is my indicator of inflation expectations. BOTTOM LINE - The reappearance of inflation is acceptable, even positive, as long as it stays moderate. The risk is a return of inflationary psychology.

From Bloomberg the normal supply chain

Keep safe

Bill