Market Story

 

11 June 2022

 

Dear Fellow Investor,

 

There is an old story on Wall St what happens to stocks during panic selling. “When the police raid a brothel they arrest all the girls, including the bookkeeper and the cook. When everything settles down, the cook and bookkeeper are released."

 

In the last month we saw the arrest all the girls’ story at work especially in overseas markets including the Dow Jones, S & P, Hang Seng, FTSE and Nasdaq. In their race to get out the door, many investors sold everything- including all weather stocks such as Apple, Microsoft, Amazon, Disney, McDonalds, Ali Baba, Taiwan Semi and Google. The big banks were also hit including JP Morgan, Goldman Sachs and Bank of America. 

 

Based on the VIX or volatility index we are approaching an extreme of fear which signals a buying opportunity.  Taking small positions at these levels is an excellent risk/ reward proposition.  As selling continues you could average your buying as the VIX rises to the 34 level .  In an atmosphere of extreme pessimism, fear and bad news those who wish to sell have already sold. High quality all weather stocks especially those that pay dividends will recover. 

 

VIX index as traded on the CME 

Big money players such as institutions will support all weather stocks so you are in good company.

 

Our Singapore, Malaysia and overseas stocks have trended lower with the worldwide stock market panic. Losses are minimal due to the quality, steady dividends and  financial strength of the companies we hold.  SATS which we hold for our PGWA accounts is an example. They are a premier airline caterer and provide food service to Asian airlines. Their competitive edge is their almost monopoly control of airport gateways in Changi as well as other airports. Without gateways they have no business and with Temasek a major shareholder their gateways are protected. As economies and  travel  pick up as it always does after panics and pandemics, investors who buy now have a good chance to capture capital gains as well as dividends in times ahead.   

 

Another example for potential recovery is the EWH, an ETF traded on the NYSE. The EWH managed by Morgan Stanley holds a basket of high quality dividend paying Hong Kong and China shares.  In China interest rates are dropping, inflation is only 2.5 % and the government is easing monetary policy. PE as of 7 June 2022 is 11.87 which offers good value compared to developed markets.

 

In Malaysia we hold Maybank, LPI, Public Bank, Heineken, Inari, United Plantations   as well as other high quality dividend paying companies.  Should panic selling in world markets subside these shares should recover. Malaysia and Singapore are beginning to recover.

 

Take care

Bill 

 

When Joe Biden became president he turned off the lights meaning the economy. Inflation at a 40 year high. Helicopter money to buy votes, forgiving student debt to buy votes, multi billions of cash to Ukraine without accountability, open borders to allow anyone including drug dealers, criminals, possible terrorists, the uneducated and unskilled to enter the US all paid for by the struggling US taxpayer. The silver lining to this cloud is that Biden will lose political control in the November election and the Republicans will open the oil pipelines, shut the borders and restore sanity to America.