Market Watch – Optimism and Money Avalanche?

Three news caught my attention over the past few weeks.

Firstly, there was growing optimism from the trade war after US and China offered concessions to exempt some trades from tariffs. All eyes will be on the outcome of their Oct 19 meeting.

Secondly, many global central banks (Source), notably European Central Bank (ECB) this week, had decided to turn on the stimulus taps. The ECB planned to cut interest rates to -0.5%, start printing money again and buy €20M in bonds and other financial assets per month starting in Nov 2019. Looks like there would be an avalanche of liquidity flooding the market. 

Lastly, there are market expectations for FED to reduce interest rates further, especially after their meeting next week.

While the STI has risen, the volume and price increase was somewhat tamer than expected. It is likely that many investors were still assessing the market direction before deciding what to do next.

In my opinion, the Oct meeting would likely not have a firm resolution to end the trade war. But there is definitely a good chance for some positive announcements as the trade war have hurt both countries. It is also in both sides’ interest to end the year on a more positive note. I also believed that the avalanche of liquidity could artificially inject a bullish effect into the market.

I am looking into the charts of STI and DBS as market benchmarks. For STI chart, the market seems to be going slightly downtrend or sideways. For DBS chart, there is a good chance of a wedge forming, that could lead to a potential upward breakout.

In my previous post, I shared about the start of my technical analysis journey. Though I have realised gains from trades in DBS and SATS, have noted many areas of improvement after my self-reflection. To this, I look forward to making better trades next time. 😊

GoHuat

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1.       How am I starting on my Technical Analysis journey?

Market Watch 2019 – SG Banks

In our previous post, we shared our plans to diversify our investment portfolio. Since then, my wife and I sold half of our OCBC shares at $11.50 and CPFIS’s STI ETF at around $3.41 to build up investment war-chest as well as protect overall profits in our CPF portfolio.

We kept a constant look out for trigger news e.g SG banks’ Q3 financial results this week, to gather information to help us assess the general impact from the trade war climate. Key points from CEOs of the three banks: 

DBS CEO - Source: Business Times

OCBC CEO - Source: Business Times

UOB CEO - Source: Business Times

To us, it is important to understand how the banks position themselves. We are keen on their strategy to support new business models and shifts in supply chain e.g. market positioning, shift in loan strategy, etc. Overall, we remained positive on the prospects in the Greater China and ASEAN market. To this end, my view is that OCBC and UOB are better positioned.

OCBC have strong exposure in Greater China, Malaysia and Indonesia. There were reports on their plans to increase stakes in Bank of Ningbo. If this materialises, OCBC’s deeper presence in Greater China could open up more opportunities to the wider Chinese market and position them well for China’s One Belt One Road initiative.

UOB have a good presence in Thailand and broad network in Malaysia, Indonesia and China. After setting up their digital bank in Thailand, there were reports of UOB considering to launch digital bank in Vietnam or Indonesia too. Both countries possess abundant opportunities. They are likely to come from the shift in supply chain from China to Vietnam, as well as from Indonesia's plans to shift their Capital which would require significant amount of infrastructure loans and investments. 

Trump’s tariff hike on Chinese imports had came in rather abruptly and have caused a stir to the stock market.

This looks like a buying opportunity... and our war-chest stands ready to fire.

GoHuat

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1.       Signs of market downturn coming?

Signs of market downturn coming?

Global banks are often the front-runners for a market downturn (e.g. bad debts, poor loan repayment, staff retrenchment, etc). Over the past 2 days, three news caught my eye:

• Deutsche Bank staff sent home as 18,000 job cuts begin (The Guardian, CNBC, 8 & 9 Jul 2019)
• Yield on the benchmark 30-year US Treasury bond briefly dipped below 2.5%, yielding less than the Federal Reserve’s short-term federal fund rate (CNN, 8 Jul 2019)
• Temasek Holdings one-year return for shareholders came in at 1.49%, down from 12.19% in the previous financial year (Straits Times, 9 Jul 2019)

The warning signs of a global market downturn have grown even stronger. For the past 2 years, our Singapore leaders have been warning the people to be more conservative through policies such as property cooling measures and public speeches. 

Even if a market downturn is more likely now, it is still impossible to time when it would actually take place. My best guess is to be around the U.S. Presidential mid-term election period (Oct-Nov 2020 time-frame). But surely many people out there would also share similar thoughts. So how accurate would this guess be? 

Instead of timing the market, my wife and I decided to diversify our investment portfolio from stocks. We considered buying currency, gold, bonds or simply build up our investment war-chest. For gold, we were doubtful if the returns were worthwhile as the US$ would likely weaken when global economy tanks. For corporate bonds, most bond returns seems unattractive with its risks. In the end, we chose to buy currency - RMB Yuan. We will elaborate more on our decision in our next post.

Do you think that a market downturn is coming soon? Feel free to share your thoughts!

GoHuat