First Minute – Lets appreciates the indices
1. The market recovered quite well for the emerging and Asia economies after the steep drop in May. Most indices are overall still in the red for the whole of 2010.
2. Japan is one of the worst performer in 2010 with the political uncertainties lingering. US did quite badly and yield -8.5% in 2010 as well.
3. Emerging Markets, Hong Kong and Russia indices lost more than 6% in 2010 as well.
4. Gold and oil prices rose slightly. Gold price is near to all time high and Oil price is 13% below end April price.
5. Vix Index rose 7.7% in June which reflect the continual uncertainties
6. Baltic Dry Index dropped very significantly to 2406. It is something worth monitoring as it may reflects the demand of shipping raw material across the globe.
Second Minute – Double Dip Reccession?
1. “Double Dip Reccession” is a technical analyst definition where a “M” appear on a chart. Market rose, reach a peak, drop to bottom, rose to a peak again due to some false alarm and dropped to bottom again.
2. Why people are predicting this?
a. European Debt Crisis
b. Stubbornly high unemployment rate in US
c. China stock and property market bubble bursting
d. High budget deficits of developed nations, etc
3. What do I think? Its not impossible but I think its quite slim. Why I think so?
a. There are not enough evidence of another recession coming at this stage especially after seeing that the Eurozone handled the debt crisis relatively well and averted a disaster in Europe.
b. We are seeing GDP growth round the world, even in the US and continual high growth in Asia and Emerging markets such as China, Thailand and even Singapore.
c. Consumer sentiments are actually improving slowly but steady in US and US economy is 60% dependent on these consumers
d. Jobless claims, though did not improve significantly in 2010, did improve gradually and held steady since January.
e. The Federal Reserves are keeping rates at below 1% and they still have around $380billion to spend on stimulus since the $850billion stimulus package was approved in 2009.
f. I believe the current price is quite reflective where pessimist and optimist are seemingly equal
Third Minute – What we see forward?
1. I’m uncertain in the short term but optimistic on the long. Yes, we do have to be careful in avoiding major structural downturn in the market but it should not be done in totally avoiding or selling everything wherever there seems to be some movements.
2. I see many buying opportunities such as Russia, Emerging markets and even China at the moment. Russia Price/Earning ratio is very low and China, Emerging Markets had dropped more than 6% for this year, which pose potential rebounding opportunities. Resources and Gold Equities are other areas that are worth considering.
3. I don’t think we are at the peak compared to the 2007 high, we are probably only halfway there. Even if market continues to drop in 2nd half of 2010, I believe that it will eventually climb back to near the real peak in probably 2012 or 2013, etc.
4. Short term wise, I’m quite concerned with the Baltic dry index. I see this index as a leading indicator of stock markets as this index reflects the actual demand for trade and shipping movement. Weak numbers may indicate weak shipping demand which translate to weak global trading activities.
5. I had advised an underweight position to most clients in April- May and we will most likely return to neutral position in July-August. Look longer term but stay wary of major structural movements
Recent Comments