Don’t Get Too Greedy Now
Markets continue to climb steadily. The STI index is close to 2970 currently. There is actually not much volume, which shows that a lot of investors remain cautious. This is actually a good sign. A steady rally that occurs as investors climb a wall of worry will last longer than one that boosts the market up for a just a short period of time, then swiftly runs out of steam.

There are lots for investors to worry about if they want to. The US economy, which has previously been recovering swiftly (to everyone’s surprise), is now slowing in its rate of recovery. Its latest ISM Manufacturing index still indicated growth, but it was not as strong as expectations. The US Federal Reserve chairman Bernanke’s latest comments on the US economy did not foster much confidence either. Furthermore, although Europe has now stabalised and the Euro has also now stopped falling, their financial problems will take some time to sort out.

But its easy to get too caught up with the bad news. One key indicator which I often go back to, is valuations, and right now, valuations for many markets remain very attractive. This shows that many companies are growing their earnings, but their stock prices have not been driven up because investors are still so cautious.

But on a personal level, I shifted $10,000 from equities (Aberdeen Pacific Equity fund) into bonds (Fidelity Asian High Yield Bond Fund). Does this mean I am turning negative on the market? A firm no to that! For me, my long term asset allocation was to strive and have 10 to 15% of my portfolio in bond funds, while the rest are in equity funds. This way, if there are falls in markets, I can shift from bond funds into equity funds while they are cheaper during these times. This year so far, I have done it twice already, the latest during the May sell off. So currently, I am considered heavily overweight into equities, even more so than my target long term allocation.

So, this shift of $10,000 into Fidelity Asian High Yield Bond fund is to move back towards my long term allocation. In truth, it is not enough, I would still remain overweight at this point. But my intention, is that as the market continues to rally, I would gradually then shift some more from my equity funds back into my bond funds. This gradual way of adjustment allows me to continue to enjoy the upside for my remaining equity funds, but I am locking in some of my profits which I made when I shifted from my bond funds into equity funds during the selloffs this year.

Volatility will always be a part of markets. If we have diversified portfolios, and we maintain discipline and not get emotionally driven towards our investing, then volatility in itself is not so scary. From the peak of the market in end March, to the April/May selloffs, when markets fell on average 10%, my portfolio fell from $379,000 to $353,000, so I lost $26,000 during that period of sell off. But I did not panic and sell any of my equity funds, and in fact shifted money from bond funds to equity funds. Now, even though markets have recovering, and still not at the previous March peak, my portfolio is already back to near the March levels.
The key thing for many investors now is to not get too greedy. If you are already into equity markets at this point, then don’t let rising markets cause you to double your equity holdings and such. By all means, enjoy the ride up, but realistically, it will be a gradual one, without the kind of eye popping returns of last year. In fact, lock in some profit occasionally as the market rises to that your allocation towards equity funds do not get too large. We must remember that although certain regions like Asia have done much better than what economists expected, there are some headwinds currently. So, keep an eye on your portfolio, try not to let it get too heavily overweight in equities as stock markets recover.

On the flip side, if you have been staying out of markets all this time, then you may want to consider putting some of that money to use because returns from keeping them in savings accounts are so low currently. While bond funds, especially the Asian high yield bond funds I personally like right now are definitely riskier than a savings account, I think its well worth the risk.

(PS: I haven’t updated my portfolio yet, because I just put in the trade today. I will update my portfolio when the transactions are completed.)

bY Wong Sui Jau ON 23 July, 2010, 6:00 pM (+800 GMT)

The Quiet Rally

Slowly but surely, stock markets are resuming their climb. I was saying that markets have stabalised and people coming back after the world cup would be surprised. We are seeing it happen now. Despite all the worries and talk about the western world slowing down, Asia’s economies continue to forge ahead, and Asian markets continue to climb steadily.

The Singapore stock market as represented by the STI index is back to within shouting distance of 2900 points. Other than the China market which has been more disappointing, most other Asian markets have shown surprising resilience and these last 2 months. Just two weeks ago, it felt like things were still pretty bad. But if we look at our funds nows, we would be struck with the strong resilience of markets. On top of that, if you had been holding a good fund, which was holding good stocks throughout these two weeks, then any losses would have been very minimal.

As an example, my main core Asian equity funds were Aberdeen Pacific Equity and Aberdeen Asian Smaller Companies. This year has been so volatile yet, since the start of the year, Aberdeen Pacific Equity is up a marginal 0.26% (based on prices as at 5 July). Aberdeen Asian Smaller Companies, which is actually a higher risk fund given it focuses more on small caps, is up 8.96% for the year.

Its been the Europe and US equity funds I held which have dragged things down. But even with them, the entire portfolio is down just 2.84% over the last 6 months, and things will improving by the day, and I would argue that Europe especially would definitely be throwing up some bargains at this point in time. I am not going to sell any of my European unit trusts, as I believe they are holding on to quality European companies which will rebound and rise after Europe settles down.

The bond funds I have held have also helped to add stability to my portfolio. The high yield bond funds are giving 6 to 8% yield on an annualized basis. The Fidelity Asian High Yield Bond Fund (USD) had the following recent 3 dividend payouts.

3 May – 0.45% yield
1 June – 0.61% yield
1 July – 0.60% yield

Where else would I be able to get 0.6% each month! In a savings account, even if I put in over $100,000, I would be lucky to get 0.6% per year rather than per month. I would happily bear the higher risk that these high yield bond funds incur for the huge difference in yield. Asian companies are doing well currently, business in Asia is booming and getting funding is not too difficult at all. Look at China, even in a year where their stock market is one of the worst performing in the region, they are having a massive IPO to raise over 30 billion SGD from the market from one single Agricultural Bank of China offering.

I acknowledge the inherent higher risk that high yield bond funds come with compared to say Singapore bond fund, but at this point in time, given Asia’s outlook, I don’t see any big recession in the offing for Asian economies. Many of the Asian governments have actively taken steps to curb inflation, to curb bank lending (in China’s case), and to keep a lid of asset bubbles forming. They are doing the right things to keep things from getting out of hand. Even China allowing its currency the Yuan to rise, is giving some outlet to the huge flow of monies from investment inflows and current account surpluses to China.

I am eagerly awaiting the “next phase” up in markets. It won’t be quite as spectacular as the rise we had in 2009. But there is still some decent upside left in markets and I think a lot of investors will be surprised as markets quietly continue to creep up. Of course, as always, keep diversified. I have already shifted twice from bond funds into equity funds this year already, so I confess I am rather heavily overweighted equities at this point in time. As markets go up, I will be locking in some of my equity profits back into my bond funds.

Psycologically, this is actually quite difficult, because if markets go up from here, the more you have in equity funds, the better your profits. But ultimately, its about not being too greedy when markets are up, and not panicking when markets are down. I forced my self to shift more into equities when markets were down this year. So, in the same vein, as markets rebound, I will force myself to lock in some profits and shift to a more neutral weighting that is not so heavily overweight in equities.

bY Wong Sui Jau ON 7 July, 2010, 1:00 pM (+800 GMT)

We are seeing a quiet rally; Europe is leading the pack!

It’s the kind that catches people by surprise. There isn’t any particularly earth shaking news happening. People are busy watching the world cup, and volume is very low everyday in the stock market. Yet, markets are quietly rallying. However, if I mentioned which regions had the biggest rallies over the last one week, I think many people would be taken by surprise by the answer.

Its not Asia, though Asia has rallied as well. The biggest rallies have been seen by the European region. Many European equity funds have rallied 7 to 10% over the last one week (as at 17th June). Granted that they were the most badly hit over the last six weeks and many are still down 10 to 15% even after the rally these few days. However, my point is that often, these rallies sneak up on us before we even realise it.

Is it time to start to look for bargains in Europe now? The biggest bargains happen after the biggest crashes. The bigger the crash, the more bargains there are. And certainly, what Europe has just gone through over the last 6 weeks wasn’t a mere correction. There was real panic in the markets there. I believe most investors here avoided being hit too badly as most were severely underweight Europe (including me). But now that Europe has been bashed down, and is showing signs of stabalising, is it time to look for bargains?

But has Europe’s problems been solved? Definitely not! They are in for more pain in the days ahead, particularly for the countries that have run up large deficits and are now struggling to control them for fear of being singled out and cruxified in the bond markets (if they haven’t already). But a key thing to note about stock markets is that you can’t wait until everything has cleared and blue skies are out. By that time, the first stage of the rally would have largely passed you by, and that often has some of the biggest gains. So similarly for Europe. Its problems are not going to be solved within a few weeks, however, has the European equity market already factored in most of the bad news?

We have to remind ourselves, the global economy is actually still in a recovery mode, and in actual fact, many of the European countries are forecast to see some sort of recovery this year as well, including Germany. Furthermore, the primary culprit of the financial crisis that erupted there was Greece. Even if you include some other problematic cases like Portugal, even Spain, it does not add up to the whole of Europe. Europe is far bigger than just Greece, Portugal and Spain.

One problem with investing into Europe is that if the Euro continues to fall further against the Sing dollar, they would reduce gains even if its stock markets went up. But again, the question is whether a lot of the bad news has already been factored into existing decline in the Euro already. It has already fallen by 15% against the Sing dollar since 6 months ago. That’s a massive drop considering it such a core important currency. Also, the drop in the Euro would have made Europe’s exports cheaper.

Since I already have some holdings in Europe, I am content to wait and monitor further at this point. But if the main economic data flowing out from UK, Germany, France remains positive, then Europe would soon become more and more interesting as a place to look for bargains.

Of course the European financial crisis affected all markets, and emerging markets, including Asia also took a hit. So, valuations are cheap there now as well. In fact, After European funds, the next best performing funds in the past one week are the emerging market equity funds. It is too soon to say that these will lead the rest out of the pack as the rebound in markets take hold, but given that markets have just started to stabalise only last week, its all the data we do have at present.

Ultimately though, investing is about being patient, and having the guts to ignore emotions of fear when the markets are crashing, and similarly, to get cautious about being greedy, when markets are booming. We don’t have to always get it at the exact low point (that is often impossible). On a fundamental basis though, with Asian exports continuing to look healthy (Singapore’s latest NODX numbers were great), there is reason to be optimistic. It doesn’t feel like that coming off the last few weeks of volatility, but I strongly believe that in the end, valuations are more important. And valuations of many equity markets are cheap right now. Even Asia, with its highest growth, is trading at only 12 times PE, and some countries within Asia are even cheaper. No doubt if we looked hard at Europe and broke it up into different countries, we would probably turn up a few very cheap markets as well.

I wish I had more investible money at this point, but most of it is already invested! Anyway, I will end off by saying that I am excited currently and looking to see where there might be bargains. I believe that daring to enter now (or at least soon) will reap bigger rewards than waiting too long. I have also just updated my holdings online. I apologise that I haven’t updated them under my profile, so those who are interested can see how I am currently positioned. (And yes, I do have both European equity funds and Latin American equity funds at this point in time).

bY Wong Sui Jau ON 18 June, 2010, 10:50 AM (+800 GMT)

A lot of people will be losing sleep watching world cup matches these two weeks. Would it have any impact on stock markets. Overall, I believe volume will be lower. More retail investors might be staying on the sidelines as they devote more energy watching the matches. However, the institutional players and people’s job is to look at markets every day will still be around. What that means though is that if some unexpected news were to surface, we could see greater market movements because the actions of fewer investors will be needed to skew the market in either direction.

Overall though, I don’t expect the world cup to cause markets to fall. There is no fundamental reason why it should. Lower volume does not necessarily mean a falling market. In fact, some large gains in markets happen when volume is low, especially after a drop. In the US, Americans are not really into soccer much, so there would be very minimal impact. It is in soccer mad Europe where we are likely to see the quietest markets, especially since the time zone is similar. In Asia, where the timing of the matches means that most people would be watching the matches at night plus there are few Asian teams represented, it shouldn’t have as much impact either.

One of the biggest contributors to market volatility, the Greek crisis and Euro’s fall has now stabalised. So, on that note, barring any unforeseen bad news, I believe markets will continue to stabalise in the coming weeks. People will be watching upcoming economic data rather closely. If there is reassurance that the turmoil in currency markets and Europe has not affected the global recovery taking place, then we can expect to see a rebound in markets in the weeks ahead.

Sovereign risk remains high though. Right now, any country that seems weak financially can expect no mercy from rating agencies, and currency markets. Case in point, the focus on Hungary, nevermind the fact that it is not even part of the Euro currency. I will be switching my holdings in my emerging market bond fund to an Asian high yield bond fund. There isn’t a lot of choices in the Asian high yield bond fund space yet. Currently, it is just the Fidelity Asian High Yield Bond Fund. That’s fine though, because the fund is a good one. I believe that corporate risk is actually lower than sovereign risk at this point, yet one can get more higher yields from being in an Asian High Yield Bond Fund as compared to being in a “safer” global bond fund.

I will also be monitoring markets for bargains. The current market levels are attractive for accumulation. Asia continues to recover strongly. A lot of the concerns right now are at most minor road blocks for Asia. If we continue at the current trend, economic power will continue to shift from the West to the East. I really like Singapore and South Korea markets right now. Singapore is an odd situation. We are looking at GDP growth of as high as 9%, maybe even higher this year. But looking at markets, you would have though we were in recession. In the end, fundamentals will matter more, so I am looking to continue to accumulate more while markets are cheap as I believe that markets will soon resume their uptrend after stabilising these few weeks.

bY Wong Sui Jau ON 11 June, 2010, 6:50pM (+800 GMT)

Markets are Stabilising

Asian markets look to be stabilising now. I believe most of the fear and panic over the Euro has been priced in by now, and nobody really believes North and South Korea will go to war regardless of how antagonistic the two sides might sound. (If they were fighting you would have thought they have started by now already rather than just trading harsh language).

The key issue which has plagued markets in recent weeks, the falling Euro and the huge debt problems facing Greece, and other countries appears to be ebbing. While it is by no means resolved (it will take some time to clear up their debts), there are enough actions taken by the European governments such that the markets have been reassured. So, while we are not exactly seeing any big rebound in the Euro, it is at least no longer in freefall.

The meltdown in Europe markets and the earlier fall of the Euro did do one thing, it scared the governments in the EC so much that they rallied together to come up with a huge package and more. Because individually, the bond markets were punishing the weaker EC countries as well by driving up the interest rates they needed for further financing of their bonds, many countries other than Greece all got very nervous and a wave of measures were taken by EC governments to cut costs, rein in spending. Basically, everyone was afraid to be the next Greece, and so, fell over themselves to show that their governments were taking active measures to cut down their debt.

All this while, economic data from US and Asia continues to be encouraging. In the US, the ISM’s nonmanufacturing purchasing manager’s index continued to stay above 50 (at 54.4) in May, which continued to signal expansion and growth. Singapore‘s manufacturing also expanded in May for the 13th straight month. One of its components - new export orders index hit a high of 55.4. Another reason why I believe markets are stabilising now is that the sell off has made stocks cheap again. Asia ex Japan markets as a whole are now at valuations of 12.7 times PE ratio for 2010 and 11 times PE ratio for 2011.

Asian companies are mostly reporting positive and growing earnings, while trading at below 15 times valuations in a generally improving economic backdrop. So, while the recent volatility focused investors attention on the negatives, and drove markets down, you can’t ignore fundamentals forever. Asia is taking the lead coming out of this last recession and since Asia is not saddled down by the debt problems which plague a fair number of developed countries, this lead will widen in the coming years. This shift of economic power towards Asia is going to continue, and it will be one of the main reasons why I continue to be bullish Asia for the long term.

As such, I am not afraid to buy more when the markets go through a correction. To be honest, I didn’t much want to look at how my holdings have dropped last week, but I still went in because psychologically, the more unpleasant markets may seem, then that means the cheaper they are, and hence the more opportunities. Take Technology. While Apple is selling so many Ipads that it is delaying some of its global launches because it won’t be able to keep up, yet Technology stocks got sold down along with everything else as well in recent weeks.

So, while you might feel lousy about looking at your investments now, remember that the best buys are made after a selloff when everything is cheap rather than at the height of a bull market when everyone is making tons of money. We have just had such a selloff, and markets have now started to stabalise. so it is now a great time to start looking for bargains!

bY Wong Sui Jau ON 4 June, 2010, 2:17pM (+800 GMT)

Shifted more into equities, added $3,000 into portfolio

I just switched out my holdings in Fidelity Europe High Yield Bond Fund into Aberdeen Pacific Equity, and added another $3,000 to my portfolio. And all $3,000 went into Aberdeen Asian Smaller Caps Fund. So, essentially, I am heavily overweight into equities at this point. Actually, I didn’t even want to look at my holdings, because I knew that with how markets have been falling since last week, it wouldn’t be a pretty sight.

However, it is also at such times, when I put in more money into equity funds. I still have about 10% in two bond funds (a US high yield bond funds and an emerging market bond fund), but I am at this point in time 90% into equities.

The current European woes with Greece debt and the Euro taking a pounding seems to drag on and on. Unfortunately, there isn’t any fast resolution to that messy situation in the EC. It will just need time to be sorted out. Time and a lot of political will because they will have to make sure Greece goes through with the tough measures (bitter medicine) required to get itself out of its current bankrupt state. (And let’s be honest, if the EC didn’t come in to help out Greece, it would have had to go bankrupt just like Iceland). Another area where political will is needed, would be when taxpayers in the other countries like Germany are presented the bill required to bail out Greece. They are not going to like it.

This brings me to my next topic. I think high yield bond funds are safer than general bond funds which hold sovereign debt at this point. It’s a rather controversial opinion because generally, high yield bonds are rated as higher risk than sovereign debt from G7 countries and developed countries which are the bonds which many global bond funds like to hold. But at this point, the whole EU is coming under strain due to the fall in the Euro, and the run on the Euro is revealing the weaknesses in the EU bloc. There are countries there, which without the Euro, and the EU, would have been downgraded to junk status without hesitation from rating agencies. The only reason they are still credit worthy is because they have the backing of the entire EU bloc. This makes the entire EU bloc risky though, because they are helping to soldier the risk of these financially weaker countries onto themselves. As a result, the Euro is falling.

At this point in time, Asian high yield bonds and US high yield bonds look more attractive because there is much less currency risk. US, as the base currency, is always where the money flows to when investors are spooked. So, as Euro falls, the US dollar can only strengthen. Asia, with minimal exposure to Europe, and growing fast, will continue to see inflows. The west are even clamering for China to let the renminbi appreciate, so Asia’s currency will stay strong.

Another reason is that I feel that the potential default risk in Asia and US high yield bonds is actually lower and less destructive than the default risk in sovereign country debt. High yield bond fund managers look very closely at companies before deciding whether to take up their debt issues. And with the generally recovering economic environment, most companies are well able to service their debts, roll them over, and obtain new debt. Even if there are a few company defaults, given the huge number of issues that a high yield bond fund will hold, the impact will be minimal.

Sovereign debt is more complicated in a way. There are the main G7 bonds which tend to make up a relatively large part of any indicative index. And there are a limited number of countries whose sovereign debt have a very credit high rating. Countries with a low rating tend to fall into the emerging market category like Latin America, Eastern Europe and some Asian countries. Yet, the developed countries’ sovereign debt ratings I feel at this point is looking risky. Many developed countries have issued huge amounts of debt in order to finance their huge stimulus packages in the aftermath of the US financial crisis. So, their finances aren’t anything to shout about. At the same time, it is arguably far far harder for a country to rein in itself if it has overspent (like Greece) as compared to a company. A company is free to fire staff, cut costs, etc, but political fallout from the citizens if a country tries to increase taxes and cut civil service staff or pay will be tremendous.

Thus, I feel that high yield bonds, corporate bonds for the most are looking far more attractive than sovereign debt at this point. It is easy to avoid Europe currency exposure if you wish to. Just stick to region specific type bond funds like US high yield, or Asia bond fund, or Asian high yield bond fund. Unlike the stock market, or the bond market, currency is a two way street. The Euro can’t just drop by itself, it has to drop vis a vis the USD or vis a vis some Asian currency.

There will come a time when it would be interesting to go into Europe markets and look for bargains. But at this point, I would err on the side of caution. So, yes, while I think markets have corrected enough for me to increase my exposure into equities, I am sticking to Asian equities for now. Asian small caps will look more and more interesting as time goes by as well. This is because many of these small cap stocks tend not to have any European exposure, unlike some of the larger blue chips which might have a global presence. I am confident that Asia will continue to grow, and while the markets are ducking for cover right now. Eventually, as the dust settles in Europe, confidence will return to Asia as investors see that Asia continues to grow despite what is happening in Europe. And as confidence returns, we will see a rapid rebound in Asian markets. Hence why I am shifting some of my bonds into equities, and topping up another $3000 more into equities as well.

We have to be patient at times when it comes to investing. Focusing on the current fear in the market will inevitably cause one to panic. I believe things will look vey different within 6 months to a year’s time so I am not focusing too much on the current negativity in markets.

bY Wong Sui Jau ON 25 May, 2010, 4:50pM (+800 GMT)

The Euro is not out of the woods, topped up 2k more     

It might look rather odd. I am not feeling very positive about the Euro, to be frank, but I just topped up another $2,000 into my portfolio. The main reason has to do with this so-called contagion effect and the fallout. Do I think that Europe is headed for more trouble, yes, unfortunately I do. But will Asia markets and high yield bonds come out of this well when the dust settles over there in Europe? Yes they would.

Firstly, let’s touch on Europe. Despite committing over 1 trillion US dollars to support the Euro, it is still coming under attack and has slid back to the levels before the 1 trillion dollar measures were announced. And it will continue to come under attack. The EC had two very stark choices before they announced the 1 billion dollar measures when the Euro came under pressure, would they stand together with Greece and the Euro, or would they go their separate ways, let the Euro fall apart and cut Greece loose. They choose the former, to stand together, and support Greece (and by default the Euro).

The problem with that, is that the market knows that such a choice is going to be a really tough road. And so, currency speculators, hedge funds will all continue to attack the Euro at every sign of weakness. Why is it so tough? Because while its easy to announce big measures, throw money at a problem, if the root of the problem is not solved, it will just get bigger and bigger.

Is it really so terrible for a country to go bankrupt? It’s not. Many countries have defaulted on their debts, had to go to the IMF for money, and forced to swallow bitter pills to turn themselves around. Some of the Asian countries had to go through this during the Asian financial crisis back in 1997/98. But while some had to go to the IMF, others didn’t, and since there wasn’t an “Asian Commission” to bail out any Asian country, whatever bitter pills that had to be taken, were taken. The more affected countries saw their currencies crash, but as a result it made their exports much cheaper, and the combination of the financial discipline plus their cheaper currencies caused most Asian countries to bounce back in a big way in the corresponding recovery. Most significantly, while the entire Asia was sold down, (even Singapore then), the bounce back was sharp and fast, particularly for countries which had strong reserves and whose currencies was never really in serious trouble (like the Singapore dollar).

But in Europe, we have over 20 countries of different backgrounds, politics and finances linked together by one single currency – the Euro. Its worked for the last ten years, but now the cracks are obvious. By refusing to cut Greece loose, and standing together, the EC has effectively made the Euro vulnerable to future attacks linked to any weakness in the weakest of their countries. If Greece shows any weakness in overcoming whatever tough financial measures it needs to take to address its huge debt, the Euro will come under attack as a result, and other countries like Portugal, Spain will all come under increasing scrutiny.

Trying to support a currency without addressing the underlying weakness has always been a futile problem. 1 trillion might be a lot of money, but hedge funds collectively could probably match that and more if they smelt blood (or weakness in this case). Even big countries like UK have learnt the hard way that if they try and prop up a currency against the rest of the market, you would probably need more money than you could cough up even if you are a central bank of a big rich country.

I sometimes wonder, if the EU had bitten the bullet, cut Greece loose from the Euro, what would have happened? There’s a difference between cutting a country from the Euro versus kicking it out of the EU. By cutting Greece loose, the EU would have shown that the Euro club is not for everyone, and even if you are part of the EU, if you don’t have the financial discipline to qualify, you are out. This would have immediately stopped the contagion then and there. The Euro would have been safe from further attacks because people knew that if countries didn’t make the cut, they would be kicked out. Greece could then be allowed to devalue their original currency and whether they manage to get their house in order sooner or later, at least the contagion would not spread.

Now unfortunately, by standing together, we have traded short term stability for long term weakness. The Euro is now only as strong as its weakest link. There will be a lot more pain going forward for the countries in the EU, and it remains to be seen if they have the political will to truly stand together. The bill has not truly been paid. When the richer member countries like Germany, France get the bill for what they have to come up with to save Greece, and the Euro, will their citizens balk? Honestly, I wouldn’t want to be holding EU country debt or much Euro now with all this uncertainty in the horizon.

So, why am I topping up more? Because even if I run through some of the worst case scenarios, I still arrive at the conclusion that Asia would come out of it alright, if not stronger. In particular ,if we are talking about currencies, its all relative. For the Euro to fall, it has to fall against something, be it the US dollar, the Yen, or other Asian currencies. Let’s not be afraid to look at extreme scenarios. Even if the Euro falls apart, would that immediately plunge Asia into a recession? It would not. There would be chaos in Europe as member countries have to go back to their original home currencies, but does it mean even Europe itself would fall into recession, much less Asia? The answer would be no.

Right now, there is weakness because the Euro is linking them all together. In an extreme scenario, if the Euro currency was dissolved, the EU would be seen as a grouping of countries each with their own strengths and weaknesses. The stronger member countries like France, Germany would not be placed in the same light as the likes of Greece in terms of financial strength. The initial chaos would be painful of course, but when the dust has settled, I do not see stronger countries like France, Germany weakening just because the Euro was dissolved. In fact, the Franc, the German mark would become more popular because they are seen as the stronger currencies in the region. Asia, itself would continue to export to Europe, and its currencies might actually rise against many European currencies. While some export markets might be affected, it would not be the entire region.

During the Asian financial crisis, while Asia countries were grappling with currency attacks, recession, the rest of the world continued to grow. The western countries hardly experienced much of a blip in their economies. I believe the same would happen even if the Euro could not be sustained and it fell apart. The Euro definitely does not have the status which the US dollar has. The world at this point can’t do without the USD, but it for sure can survive without the Euro, which didn’t even exist more than 10 years ago.

At this point though, I am glad I have switched out of financials, into Technology. There is too much ongoing potential problems at this stage and possible contagion effect to take a lot of risk with the financial sector, even though I do believe that Asian financials will come out alright. In contrast, the Tech sector will continue to see growth and recovery this year. The iphones, ipads, TVs flying off the shelves are proof of that.

I would also be more comfortable putting money into high yield bonds rather than a global bond fund which would likely have G7 and developed market bonds. But this blog entry has become longer than I originally though, so I will save my thoughts on why I actually think high yield bonds are safer than a global bond fund or developed country sovereign debt at this point in time for a future blog entry. Till next time.

bY Wong Sui Jau ON 18 May, 2010, 5:50pM (+800 GMT)

Added $1500 in the Current Market Correction

I did some switching into the Henderson Global Technology fund last week. With the correction we are seeing this week, I added in another 1500 to my portfolio. The funds added into were as follows:

$750 – Aberdeen Singapore Equity
$750 – Henderson Global Technology

The current weakness in Asian markets stems from Goldman Sachs and China. Goldman Sachs is facing criminal charges and the intense spotlight on the firm, and fears that it may open the way to implicating other financial industries has western markets worried. Here in Asia, a bigger worry is how China is stepping up its efforts to combat rising inflation and asset bubbles. China just ordered the increase in bank’s reserve ratio. This is just the latest in a whole host of new policies meant to limit a rising property market. More can be expected to follow. As a result, the China markets, including the property sector has recently corrected downwards.

However, despite China’s efforts, there remain many concerns on whether they will be able to successfully cool down the stock markets and the property market, without causing the China economy to slow substantially. As China’s red hot economy has been instrumental in leading Asia out of the current recession, many are understandably nervous.

However, despite these concerns, I still think Asian stock markets at this point are fairly cheap. We are not even back to the 2007 highs in most cases, and even then we were not at a bubble. The shift in economic power continues to happen as Asia charges ahead in a V shaped recovery as opposed to the much weaker recovery being seen by developed regions like Europe or US.

But I already have an heavy overweight position in Asia. For me, Technology remains the most interesting at this stage. I think the Technology bubble bursting in 2000 has a big psychological impact on many investors, many of hope have sworn off the Tech sector permanently. But I believe it is more important to look forward than to look back.

Technology has undergone big changes in the last ten years. The sector is no longer filled with startups with no business model, and just some vague internet strategy. The Technology crash has weeded all those out. The remaining Technology companies are now all strong leaders within their own fields and many are cash rich. At the same time, coming out of recession, many consumers will be looking to buy more Tech products, and not just consumers, companies as well. This is because many companies let their IT spending slow during the recession to save costs, and they will now have to gradually upgrade their systems.

Technology also doesn’t face the kind of scrutiny that other sectors are facing at the moment. They aren’t being hauled up to face criminal probes like Goldman Saches, nor are governments thinking of levying any special taxes on the sector (unlike how Australia is now talking about levying a special super tax on resource companies). I think Technology will be the dark horse sector over the next 12 months, and could outperform most of the other sectors including those getting the most interest now (property, financials and resources).

My other purchase (more like a top up) was into Singapore. This has a more home base bias, but ultimately, I have no worries on Singapore. The economy is expected to grow close to 9% this year (substantial rise in economist forecasts we are seeing!). And many of the blue chip companies are well capitalized, cash rich, and will be beneficiaries as the Singapore economy charges ahead this year. The two IRs which are now completed are icing on the cake, but don’t estimate their contribution. Already tourism arrivals are substantially higher. Singapore is forging ahead as a financial hub, and as a fun, happening place for tourists to come and visit. Based on all these and with valuations at this point still at a relatively fair 14.7X for the year 2010, Singapore remains attractive.

bY Wong Sui Jau ON 4 May, 2010, 5:50pM (+800 GMT)

Switching Focus towards Tech and Small Caps

I made quite a few switches and two purchases today. These are summarized as follows:

1) Switched all holdings in DWS Noor Precious Metals to Henderson Global Technology (about $10,000 worth)
2) Switched all holdings in Fullerton Asian Financials to Henderson Global Technology (about $5,000 worth)
3) Switched all holdings in ING RF Emerging Markets to United Global Emerging Markets Portfolio (about $20,000 worth).
4) Purchased S$1,000 worth of Henderson Global Technology Fund
5) Purchased S$ 500 worth of Aberdeen Asian Smaller Caps Fund

So, what’s the rationale of the switches and purchases? Mainly, I am switching out of precious metals and financial services into technology. For precious metals, I believe the upswing for such commodities has been largely priced into the market. Preciously, there was the added fear that with the weakness in the USD and the global financial system, commodities was the one place to be and I held some of it as a hedge.

Increasingly, we are seeing signs that the whole world is clearly coming out of the financial crisis of Sep 08. (Its one and a half years already, its about time!). Markets are looking ahead and the story for commodities is no longer so compelling. Previously, I liked financials because they had been beaten down during the September 08 Lehman Brothers crisis. Indeed, the Fullerton Asian Financials fund earned me a 53% profit. However, I see some dampeners on financials going forward.

These include rising interest rates and growing regulation. The growing regulation presents especially a challenge. Many developed countries want to claw back money from financial institutions that they bailed out during the Sep 08 crisis. So, they are imposing additional taxes and such. To further protect investors, there is also a whole flood of regulation getting pushed through which would make selling financial products far more onerous and difficult. Finally, in Asia, which is going through a V shaped recovery, there is growing government intervention to cool down a rising property market. These measures will curb loan growth.

In contrast, the technology sector is looking better each day. The global recession previously hit tech companies as well. Now however, the recovery is filtering through to the consumers as well. There has been increased retail sales in US and in Asia. Singapore, one of the exporter countries of tech products saw its latest industrial production surge by 43% year on year last month (beating economist forecasts by a mile). The surge was due to strong resurgence in biomedical production as well as semiconductor chip production. Electronic shipments are accelerating as consumer confidence comes back.

Think of it from a from-the-ground point of view. The global economy is recovering. People are still worried, but getting increasingly confident. While they may not plunge into the huge spending ways of before the Sep 08 crisis that soon, spending will certainly increase from the belt tightening levels during the recession. And tech products will be a big sought after consumer item to spend that money on. After all, technology progresses very fast, so within one to two years, the next generation of tech products will be looking very appealing to consumers. You also have Apple coming out with Ipad, newer versions of Iphone. You have Avatar bringing greater awareness to 3D, increased demand for newer fancier TV screens. So, while people might not be confident enough to splurge on a brand new sports car, a tech product is certainly cheap enough for some self reward and indulgence! The tech sector has been the whipping boy amongst investors since the 2000 technology bubble crash for too long. After ten long years, it would certainly be time for investors to relook this sector with fresh eyes. I think Technology is on the verge of a new resurgence. Hence, my shifts into Technology within my portfolio.

Another area I like is small caps. I already have a fair amount in Aberdeen Asian small caps, so just added a bit more to the fund. I think that in a resurgence of the global economy, at first, it’s the blue chips that will get the most attention. But increasingly, a lot of the recovery will be priced into the clue chips and the best bargains will no longer be in those, but instead in the small caps. As always, be diversified, but I am seriously thinking of shifting more weightage towards small caps as more and more of the good news gets priced into the blue chips. As risk appetite increases with the fading of memories of the last big crash of 2008, we will see more and more funds flow into small caps.

bY Wong Sui Jau ON 28 April, 2010, 4:00pM (+800 GMT)

While Asia Charges Ahead, Don’t Let Euphoria Set In

First, the trade ministry announced that Singapore GDP surged 13.1% year on year in the 1st quarter 2010. On a quarter on quarter basis, the surge in GDP was an eye popping 32.1%, the highest ever growth on record, and higher than any economist had dreamed of forecasting. On the back of this, the monetary authority of Singapore (MAS) also announced that it was recentering SGD’s trading band as well as signaling a policy towards gradual appreciation. This is an unprecedented move in terms of tightening monetary policy as MAS has never done both at the same time before. It also represents a very significant shift in policy. MAS is essentially saying that with the surging economy, the worst is not just over for Singapore, in fact, the Singapore economy is now booming so much that they need to rein in potential inflation, so they are taking action immediately.

Remember when back in July 2009 (last year) when Singapore was the first to announce that its economy was coming out of recession, and this was soon followed by other Asian economies in the region. Singapore is one major trading hub in Asia, and closely tied in to the global economy. Its health and overall economic growth direction is an early indicator of how the rest of the export oriented Asian economies are faring. Singapore’s stunning 1st quarter GDP growth is a telling indicator that global trade is recovering, and along with that, Asia is now not just experiencing a “V” shaped recovery, it is now literally going into a boom period.

Hard numbers tell a bigger story that anything else. While Europe may still moan and worry about Greece and other potential debt ridden European countries, and US is still trying to slowly lower the jobless rate, Asia is now literally running on full steam ahead. Investors are beginning to recognize that emerging economies as a whole, and Asia in particular, is the locomotive pulling the entire world out of the 2008 recession. And Asia is now experiencing a red hot economy. Central banks in Asia should be more worried about inflation and asset bubbles than on double dip recessions. Property prices has surged in many parts of Asia including Singapore, Hong Kong, China, and Taiwan, and this is despite various moves by Asian governments to keep a lid on property speculation. The latest is that Singapore March home sales were up 47% month on month. Stock markets have also risen, though not as strongly as property.

The next two to three quarters will continue to see this trend being played out. While 1st quarter numbers are already eye popping, second quarter numbers will be good as well. Let’s not forget that while stock markets started to surge in 2nd quarter 2009, most of the economic indicators themselves did not show as much improvement at all. This led many to question the sustainability of the rally in the 2nd quarter market rally last year. This means that as we move into 2nd and third quarter this year, the numbers will continue to look very good, compared to the base last year, which is very low.

I am already fully invested, and I even shifted some money from bond funds into equity funds during the February correction. For now, I am sitting back and enjoying the ride up though I am monitoring the situation closely. The improving fundamentals of the economic recovery are now in the process of showing up in solid GDP numbers throughout the region and in companies earnings as well. Singapore is a precursor to the rest of Asia. The question should be whether markets move up beyond what the improved fundamentals justify on the strength of investors turning into a very bullish mode. We are not quite there yet, because the full improved numbers have not shown up in reported economic data or company earnings yet. Nor are we at the stage where everyone and their neighbor is shouting buy.

But as the market climbs higher, then such euphoria will be things that investors need to watch out for. The next two quarters should be glorious and very exciting for investors as they ride the market up. Many who bought in since last year or start of this year are now seeing their patience rewarded. While it is human nature to want to check on your holdings often to see them rising, don’t get drawn into making any emotionally driven decision. The coming few months are likely to be volatile even if on the uptrend, so investors need to be careful. As market sentiment gets more and more bullish, investors tend to get less careful. In actual fact, it should be the reverse. As the market surges ever higher, we should be more cautious instead. So, I will be monitoring the markets closely. At some point in the next few weeks, I may shift back some money which I shifted out of bond funds towards a more neutral stance if the market gets euphoric.

bY Wong Sui Jau ON 16 April, 2010, 11:22aM (+800 GMT)

Market Timing

The advisors all advise against it, but everyone all want to do it. Many people all believe that they should time the market. The big stock market crash in 2008 further cemented many investor’s conviction that it was absolutely necessary to time the market. With that in mind, I just wrote a long article about the many pitfalls on market timing for the GM column in the upcoming FSM magazine.

Fear and greed often make us time the market wrongly, so it has to be a very savvy investor who can keep his emotions in check, or one who has taken enough hard knocks from his own investing through the years who will not be swayed. History has not been kind to long term investors in the last 2 years as they would have held their investment to the top of the market in 2008, and then seen several years of gains possibly wiped out within that one year. So, I think it’s futile to dissuade anyone from market timing. Besides, there are many investors who have successfully timed the market and done well too. Also, Fundsupermart will be announcing big price changes soon that may make people want to time the market even more because it is cheap to do so.

Just be aware though that there is always many emotional pitfalls in market timing that will often push you to do the opposite of what you should be doing, which is to buy low and sell high. Also, the shorter the investment time horizon, the more likely market sentiment may drive the market in a different direction as what fundamentals point towards. So, if you do want to market time, please do it with both eyes wide open!

bY Wong Sui Jau ON 26 march, 2010, 7:30PM (+800 GMT)

The Best Kind of Rally

We are now going through what I would term “the best kind of rally”. Why is that? It is because this is the quiet but steady kind of market increases which do not stir up much attention, but it eventually builds up into a bull market. This is the kind of rally that comes off a selloff, like the one we saw in January, and during which there are still concerns aplenty about everything from Greece and the Euro/pound under attack, to the strength of the US recovery.

This is great because it doesn’t draw attention to itself until much later. It’s a slow building kind of rally that can potentially snowball into big gains. A quick and fast 2% to 3% surge in one day, which will draw media attention, will certainly see profit taking the very next day. There are tons of pessimists and detractors who would jump in during a big market surge to question why it is going up so much. But a slow and steady increase is something nobody asks questions about, and one which the media will not cover.

Let’s take the STI index. Just one month ago, it was hovering at 2,750. But now, it is at over 2,900. If it did this with big 3 big 50 point gain days, there would have been the inevitable profit taking, questions on why it can suddenly surge 150 points in too short a time. So, 150 points in 3 days will quickly see it running out of steam and falling back. Yet, 150 points over a month and nobody bats an eyelid. In fact, people hardly even notice! Its not newsworthy at all! The media is more busy covering the latest on Jack Neo or the Thailand mass protests.

I think the market is all set for the next upsurge. It won’t be an eye popping rise, but a more sustained gradual rise. All the bad news has already been said and done to death. People are still talking about US banks’ bad debts, Greece bad debts, China tightening, central bank exit plans and double dip recessions. But its all old news by now. It is fast losing its power to move markets even in the short term now. And all this while, positive economic and company data continues to flow out. The latest is that Singapore’s February non-oil exports grew 23% from a year earlier, and 21% up from January.

It isn’t just Singapore, the whole Asian region is growing fast. Yet, this increasing pace of growth in Asia is being largely ignored by people previously focusing on whether Greece will pull down the Euro, or whether US banks are still hiding tons of debt. Don’t wait until its clear blue skies. Don’t wait until the talk about bad news has died down, because that will only happen when markets have moved much higher such that their strength has muffled these concerns. By then, it would be too late.

There is still time, but before you know it, markets will be a lot higher. Right now, people are still worried, still cautious. Hence, trade volume is still low. But the data that does matter to fundamentals, the economic and company data, these are all continuing their positive trend. If you are like me, and already fully invested, then its just to sit back and wait. For those still waiting, don’t wait too long. We are already in the midst of a rally!

bY Wong Sui Jau ON 17 march, 2010, 3:30PM (+800 GMT)

Markets Are Moving Up Again

It seems like just last week we were still plagued by worries over how Greece’s problems might spread to the rest of Europe, and markets seemed dead. Yet, as of today, when I tabulated how markets have performed over the last one month (as of 8 March), the numbers are revealing. They show that most stock markets have bounced back quite a bit over the last one month. I looked at the category average in the fund selector and drew up a table. Table 1 shows the best performing to worst performing funds on Fundsupermart divided via geography.

Table 1 (Average Performance of funds in area)

As table 1 shows, Australia, Brazil, Latin America, BRIC and Korea funds were the strongest performers on average over the last one month. Everything went up. Its was mainly a difference of how much. If your equity fund actually fell over the last one month, it would have been an oddity. Not surprisingly, Asia, and emerging markets funds, having stronger fundamentals and growth prospects, rebounded more strongly than developed markets. At the bottom of the table, Japan and Vietnam equity funds disappointed. I turned to look at the sector funds now in table 2.

The performances of the sector funds suggest that resources, gold and finance funds have bounced back in a big way. Commodity and resource related funds are again a favorite. Finance is quite close to the top as well though, which is surprising given the large amount of bad news and potential crisis that the sector always seems to generate. I believe its because it is priced cheaply at the moment. Lots of people don’t dare or wouldn’t touch finance stocks with a ten foot pole right now, but very often, it is such times when there are the best bargains to be had. So, the finance funds could still give us a shock yet as this year plays out.

The biggest underperformers this month were the fixed income funds. Its not really that they are bad as an asset class. Indeed, when volatility is very much present in stock markets, as it was in January and February, investors appreciate the stability bond funds bring. But now, in hindsight, it looks like my decision to shift 20% of my bond funds into equity funds in February was a good one. Bond fund returns are likely to stay relatively low given the still abnormally low interest rate environment throughout much of the world. But given the high degree of volatility in markets, I think most of us would still appreciate having at least some bond funds, low return or otherwise.

My sense of the current situation is that a lot of the bad news in recent times like Greece’s bad debts, China tightening, Central bank exit plans, and such have now all run their course in the media. So, these are mostly all factored into markets already. In the midst of these, the global economy continues to grow, with Asia and emerging markets leading the way. So, with much of the bad news already factored in, I believe that the upcoming few months would see gains in most stock markets as positive earnings data and economic data continues to filter through. For those still waiting on the sidelines, don’t wait too long. When markets rally, the speed at which they do so can often catch many investors unawares. Looking at just table 1 and 2 alone, I think many of us would have been shocked that some of the funds have gained close to 10% within the last one month alone.

bY Wong Sui Jau ON 10 march, 2010, 4:30PM (+800 GMT)

Added Kids’ Ang Bao to Their Accounts

It has been a long time since I actually logged in to see how my kid’s investments were doing. After all, those are going to be there until they reach at least 21 years old, unless it is used for their university education. And right now, they are barely 3 and 5 years old this year.

The last time I checked their accounts was around a year ago, shortly after Chinese New Year, and at that time, I remembered their holdings were showing losses. But I was quite sure that if the investment horizon is very long (in this case, more than 15 years), then I am very confident that it would be substantially higher by the time I finally hand the account over to them.

But lo and behold, when I checked their accounts just now, both were back in the black now. What a difference one year makes! In any case, it is after Chinese New Year. And during Chinese New Year, they got Ang Baos (Red Packets). At this stage, my 3 year old daughter just plays with a particular Ang Bao if it has very nice colors, and then drops it on the floor after she loses interest. My son is slightly better, he passes it to his mum, but he has no interest in it either.

So, we consolidate all their Ang Bao after Chinese New Year, and now I am going to invest some of it into their unit trust investment account. Their portfolios are very straight forward. They only have two funds. One is an Asia Pacific equity fund and the other is a Singapore equity fund. They have no bond funds. The reason being that they don’t need it. Bond funds are there to provide stability, to reduce volatility. This is especially important if you don’t have a particularly long time horizon. But in this case, consider my children.

Do they care if the market slumps? Nope. All they care about right now, is whether we bring them to the playground downstairs to play. So, things like market volatility, portfolio volatility is irrelevant to them. They are not going to panic and take out everything at the bottom during a stock market crash. They aren’t going to scream at their dad and demand that everything be switched to a low risk low yielding savings account to “protect” their money.

Are their investment horizons long? Yes, in this case, well over 15 years, if not longer. 15 years is a long time. You could sometimes fit several market cycles into a 15 year period. Will equities outperform bonds over such a long period? It would. So, since volatility is not an issue in this case, then I would go for the asset class that would have a better performance over a very long term instead going for a more “balanced” type of portfolio.

In this same vein, I think those kids accounts, savings accounts are good in principle, but bad in execution. If you are committed to setting the money aside for your kids and you understand investing, then it shouldn’t go into a savings or kids account. The interest rate is so low you would be lucky to beat inflation. Right now, bank savings accounts will only give you 0.1%, and kid’s saving account interest rates are usually similar.

So, for my own kids, I place them into equity fund investments. I am confident that over a period of more than 15 years, they will beat the interest rates that banks are offering right now. All I need to do, is to withstand the volatility in the meantime, and can I kids handle it? Yes they can!

For example, the Singapore equity fund that both the kids have is the Aberdeen Singapore Equity Fund. Its actual annualised bid to bid performance over the last ten years is 9.28%. (Based on 26 Feb prices). This means that $10,000 invested ten years ago would be worth $24,288 or 140% more. In the same vein, $10,000 put into a savings account giving just 0.1% per year would give only $10,100 after ten years.

Assuming the fund keeps up its performance, and gives the same annualized performance over 20 years. This means that after 20 years, the same $10,000 would now be worth $58,994 while the one in the savings account would still only manage $10,201. To me, its quite clear. Am I willing to risk market volatility (which doesn’t have any effect on my kids) for substantially better returns over a very long period? The answer to that is a big “Yes!”

When my kids are old enough next time to start learning about money, I hope to use their own investment accounts to show them how money grows over time, and how much of a difference there is between “saving” money vs “investing” money.

bY Wong Sui Jau ON 2 march, 2010, 10:45aM (+800 GMT)

On Exit Programs and Central Bank Tightening

The US Federal Reserve increased its discount rate on Friday from 0.5% to 0.75%. This is the interest rate which it charges banks for emergency loans. The move set the market abuzz last Friday and contributed to the fall in markets on Friday as there were fears on whether this was a shift in monetary policy for the Federal Reserve. (Currently the Fed Fund rate stands at a historic low of 0.25%).

Many investors are currently worried about changes in policy from central banks. In a way, the many measures taken by central banks across the world in the aftermath of the Lehman Brother’s crisis has fostered a certain amount of expectations. The perception is that the whole world was in danger of plunging into a deep crisis, a deep depression, so extreme measures had to be taken.

Now, though we have clearly put the worst of the crisis behind us, we still want those extremely loose monetary policies to continue. We want rock bottom interest rates to continue, and we want central banks to continue to keep the tap open, and to continue to inject tons of money into the system. In a way, its like falling down, and ending up in crutches. Doctors will recommend trying to walk even while our legs hurt, but initially, we want to stay in our crutches because it hurts. We may even end up relying on them if we don’t recover well precisely because we did not exercise them enough while recovering. As a result, those crutches, which should have been temporary, become permanent.

We are facing the same situation right now. Stock markets, used to the extremely loose monetary policies and massive stimulus packages rolled out by governments all over the world are now reacting negatively at the various pullbacks. So far, the pullbacks have actually been fairly mild. The Fed has not even raised its actual Fed Fund rate. Only the discount rate was raised, and banks these days are hardly utilising it in the first place. Yet, the reaction was still negative.

In my mind, I see it as necessary, and in fact, I would rather it happens and take any correction that comes with it. While we remain at an unrealistically low interest rate environment with loose policies, there will always be the nagging fear of bubbles developing, and any recovery will never be complete, since it was achieved with the “crutches” of government aid. Only when we are back to a more “normal” interest rate environment, and when government policies are lesser based on a crisis type of environment, and yet, the global economy demonstrates that it can still grow, will there be a more sustained increase in markets.

So, my sense is that I would rather not fear any upcoming change of government policy towards tightening. It was good while it lasted, but everyone knows it would never be permanent. Let any jitters and corrections happen now, it will only allow the market recovery later to be longer, and more sustained. Most importantly, keep the bigger picture, and longer-term target in mind.  

bY Wong Sui Jau ON 22 february, 2010, 5:40PM (+800 GMT)

Chinese New Year Rally?

Markets have continued to be volatile. But the Singapore, Taiwan and Hong Kong markets have shown unexpected strength today (Tuesday), after the selloff over the last two weeks. Could this be the start of a Chinese New Year Rally?

Even if it doesn’t start this week, I believe markets will start moving back up in the weeks after the Chinese New Year. Current troubles are mainly those occurring in regions outside of Asia. About Europe, which is where the main concerns seem to lie right now. To me, it is inconceivable that the Eurozone countries will allow the entire Eurozone to be dragged down by just a few country’s troubles. Yes, Greece has problems, but would they be allowed to balloon to such an extent that the Euro comes under jeopardy? I find that extremely hard to believe.

Would the likes of France, Germany, Switzerland, and the many other countries in the EC allow Greece to affect investor’s confidence of the Euro to such an extent that the Euro goes into freefall? I believe they would either bail out Greece, or if they don’t want to foot the bill, even take the more drastic step of delinking Greece’s currency from the Euro.

Notice that now, there is hardly any mention about China tightening any more? The reason is that it was a knee jerk reaction. Now that it is over and done with, as China continues to post strong economic growth numbers, we will see a rally because it shows that despite the tightening, growth can continue. In fact, this will hold true for the other concerns plaguing the market right now, including the current Greece troubles and the Euro coming under pressure.

As the economy continues to improve, many of these concerns will gradually fade away or at least become priced into the market. For now, because of the sharp sell off over the last two weeks, it is a good time for bargain hunting. As always though, maintain some diversification even as you bargain hunt and don’t take on more risk than you can bear. The worst would be if in hind sight, it was good to buy in now if you held it over 2 years, but you failed to hold it because the market then corrected another 5% before it hit bottom this year, and you panicked and sold out at the bottom.

I have only shifted 25% of my bond funds, so I still have 75% of what I started the year with, ready to take advantage of a any further drops. Even if we see a rally from here on, I would mind, because the amount I am shifting into equities is one which I am comfortable with. Sometimes, it better not be too greedy, although its better to be greedy when people are fearful and to be cautious when people are greedy.

Here's wishing everyone a fruitful and prosperous lunar new year! Gong Xi Fa Cai!

bY Wong Sui Jau ON 9 february, 2010, 5:15PM (+800 GMT)

Euro Woes and US Jobless Claims

It’s a sea of red today across all Asian markets. Its not just Asian markets, Europe markets are down and US markets fell last night as well. Oil and gold prices are down too. US jobless claims turned out higher than expected, rocking US markets, then in Europe, the high debts run up by countries like Greece has investors worried it would spread to other European countries that has also run up large public debts. Notice that no mention is made now about China tightening anymore, because that’s old news already.

But should investors be selling out now? Ideally, most of us should already be in a diversified portfolio with some fixed income funds to help stabalise our portfolios. Bond funds don’t make as much money as equity funds, but they are worth their weight in gold during times like these. But unless your portfolio is in a big mess, now is not the time to think about upping your fixed income allocation just because it seems more stable now. Because when the market slumps like this and we switch out from equities into bonds, we are likely just selling out of equities at a low.

Ideally, when we rebalanced your portfolio previously at the end of the year, we would have taken profit from your equities or equity funds. Then now, we would actually be in a position to take advantage of the current volatility to look for bargains in the beaten down equities and slowly accumulate.

On my own personal portfolio, I just switched a quarter of my bond funds into equities. And if the market falls further, I will switch more. I work on a worst case scenario basis. Since we are not back to all time highs, and since markets dropped 50% in 2008, what's the maximum downside to markets? It could range anywhere between 10% to 30%. (Things would have to really collapse for it to fall below that).

Hence, I am prepared to switch gradually the rest of my bond funds into equity funds if the fall continues. This would be in proportion to the extent of the current drop. But even if it never reaches 30% down (in my opinion it won't), and it rebounds whether after falling 10% or 20%, that is fine.

The key thing to note is that in any kind of market slump, things eventually do turn around. Jumping in too early can hurt just as much as jumping into the market too late. But trying to time the exact bottom of the market is likely to be impossible as well. I think most people didn't dare to enter markets back in March 2009.

The main point I am trying to make, always have a diversified portfolio, with some amount into bonds or bond funds. This allows you to take advantage of exactly the market slumps like the one we are seeing now. Be patient, have the daring to go in slowly as everyone is selling out. There will definitely be bargains available. Investing is about not letting your emotions take hold, and also about being patient. Markets are very short sighted, they are falling now because everyone is selling. Although the picture could look very different 6 to 9 months later, markets can’t look that far out. All they care about is that in the immediate short term, US jobless claims numbers are bad, and Greece’s troubles are causing Europe markets and the Euro to take a pounding.

One interesting trend I have noted so far, is that Indonesia, Malaysia and Turkey are still holding quite up quite well. For Indonesia and Turkey, these two are interesting, while I would not have pegged them as strong performers in a year where external trade recovers, they will do well even if the external trade remains bad! That’s because Indonesia and Turkey have large domestic markets, and exports are a relatively small part of their economy. They are to a large extent “self sufficient”. So, it may be a good hedge to consider in counterpoint, even though I still think that external trade should recover this year.

Malaysia on the other hand, is mainly a more defensive type of market, and hot money flows more to other markets than Malaysia. Hence, when investors are spooked and hot money flows in the opposite direction, Malaysia suffers the least.

Well, the weekend is here. My switches will buy in on next Monday (the switch sells happened on Wednesday). I won’t know if Monday, thing are going to get better or worse. Short term fluctuations are notoriously hard to predict. However, I do know that at times like this, do not panic! When the market is frightened, as it is now, every news that comes out will see a negative spin in it. Don’t let it get to you. I doubt if the world will suddenly go into a huge U turn and plunge back into recession again. But it does look like the year of the Tiger is going to be a very bumpy one, so hang on tight! Just make sure not to let your portfolio become so exposed to risk that you can’t even celebrate the Lunar New Year without worrying about it.

bY Wong Sui Jau ON 5 february, 2010, 5:15PM (+800 GMT)

Shifted 20% of my Bond funds into Equity Funds

I mentioned in my previous blog post that if markets went down further, and are down 10%, I would shift some of my bonds into equities. I waited a couple of more days, during which I added another $3,000 into equities, but it seems like we have reached a certain lull in the market. Things are still quite volatile, as can be seen by sometimes very wide swings in the market, but we seemed to have reached a certain “support” point.

Now, I would clarify here first, I am not a chartist, and it is unlikely that I will ever be. I prefer to focus on fundamentals and adopt a longer term mentality then just two weeks or 3 months. But I was bullish at the start of the year, and nothing that has happened since has really changed the fundamentals of the global recovery we see taking place. This means that when markets fall lower, I get tempted to put even more into equities.

Its just as well I forced myself to rebalance my portfolio in December, and even though I was bullish equities, I ended up moving some money into my bond funds because my equity funds had outperformed the bond funds by spades in 2009. Thus, I now have nearly $52,000 in bond funds, and so if I feel that I want to take advantage of a market correction to add back into my equity funds, I can.

However, instead of adding everything, I shifted 20%. Here’s how I see things going. In actuality, most Asian markets are not even down 10% yet, they are only down around 7 to 8%. But overall, I am bullish for the year, so this could be as low as they go before markets start to recover again. However, nothing is ever a sure thing in life. So, I look at worst case scenarios and alternate scenarios.

Firstly, at this stage, I don’t see a double dip recession happening. And even in recession years, a big market crash would typically be 30% down from their peaks. Assuming a worst case scenario (which I don’t believe will happen). I would want to be 100% into equities if markets are down 30% because we would probably be at or near the bottom by then already. Markets are only down 8% at this point, so instead of shifting all of my bond funds into equity funds, I shift 20% instead. This then allows me more leeway to shift more of my bond funds into equities if markets happen to fall further.

The more likely scenario is that markets will soon stabilise, and as the global recovery continues to take hold, start to move north again. In this case, I would probably regret not having shifted everything in bonds into equities, but having a lessor return is something I can live with. You can’t get everything exactly right. I am not trying to predict we are at a bottom for this year. If I knew for sure, I would shift everything into equity funds straight away.

The whole concept of rebalancing, and having some allocation into both equity and bond funds is about managing risk. Hence, my actions over the last two weeks. So, while I would take opportunity to make some shifts like I have done, I recognize that if markets do recover and move back into a bullish mode, then it would be wiser to shift back to my original allocation at the start of the year then. Just in case people are curious, I shifted $3,000 from the Fidelity High Yield Bond Fund into Aberdeen Pacific Equity, and I shifted $8,000 from INF EF Emerging Market Bond Fund into Aberdeen Asian Smaller Companies fund

Certainly though, I will be watching markets closely at this point. Do I think we are at the bottom for this year? I wouldn’t know, since short term sentiment can change very quickly. However, I don’t believe the fundamentals have changed in any major way over the last two weeks, so, the correction has made me more aggressive in my portfolio positioning.

bY Wong Sui Jau ON 3 february, 2010, 5:30PM (+800 GMT)

Heavy Correction These Few Days. Look out for Bargains!

After the drop in markets last week, today saw another major selloff. Markets are getting spooked with the heavy selling. There isn’t really a major reason. But nevertheless, people are pointing to China tightening was the major culprit, with the new US proposed regulations on the finance sector as oil on the fire. When people want to explain a selloff, any reason will do.

China has been talking about tightening since last year. If we are worried about asset bubbles forming in Asia, then what they are doing right now is exactly what is needed to cool down a red hot economy that is in danger of over heating. But cooling the economy comes with less liquidity, and so, people are selling off in reaction to that. On a fundamental level though, China’s economy may now be allowed to continue a high rate of growth without necessarily having asset bubbles developing and bursting, bring all that growth to a big halt.

For investors who had been waiting for a correction so that they can buy in again (for those that missed the boat in 2009), now is a great time. Right now, it is a lot of negative sentiment and fear which is driving the selling. It isn’t because economic fundamentals haven’t been improving. The latest numbers for Singapore industrial production just came out, and those were great. Manufacturing output increased by 18.1% in December on a seasonally adjusted month on month basis. And that is the first time we had an increase in the last 5 months. The electronic and chemicals output all saw double digit increases (electronics output up 57.3% yoy, chemicals output up 27.7% yoy). The external environment is improving.

So why have markets been going down this past few days since last Thursday? Heavy profit taking and fear is driving this. The investors that went in last year are sitting on hefty gains, the last few days have made them fearful and some want to lock in their profits. I didn’t wait till now, I already rebalanced my portfolio back in December, I hope many of you did as well.

Now is the time to look for bargains. I will be monitoring this closely. When most of the markets are down 10% from its peak this year, I will shift some money from my bond funds over to equities. If markets pause after this round of corrections, then regain their confidence as economic fundamentals continue to improve, we will see a strong rebound. Fear and negative sentiment could push markets down 15% to 20% even from their peak, but if that happens, I will shift close to all of my bond holdings into equities. It would be a rare opportunity and I firmly believe that if that opportunity happens and is presented to me, I would jump at it.

Looking at your holdings, you won’t be very happy, especially if you have been monitoring them every day. Seeing them drop daily can be depressing and scary. But market cycles are common, and market corrections can easily see the market shift down 10% or more. Just remember, the best buys are made when everyone is selling, not when everyone is buying. So, if you are feeling rotten about how markets are doing now, yet you dare to buy, just like I did last Friday, it might not necessarily be a bad thing. Another thing to remember, you can’t always get it exactly at the “bottom”, somewhere near is good enough. The boat which was originally departing has come back for now, would you board it?

bY Wong Sui Jau ON 26 january, 2010, 4:45PM (+800 GMT)

Market Correction! Bought 6k More

The correction in the last two days has been swift and sharp. At the time of writing, the STI index is down 100 points within just two trading days. However, I just bought $6,000 into my portfolio. The investment were as follows:

Schroders Latin America Equity Fund - $2,000
Aberdeen Singapore Equity Fund - $2,000
LionGlobal Korea Fund - $2,000

Why am I buying now? Because I see this as a correction. The main reasons why the market is falling is due to fears on China tightening its policies to curb inflation. The worry about China tightening is not a new one. There has been fears of the China government coming in to “cool” the market since last year. It did not stop the flow of money into China, and China’s inflation has continued to move upwards. According to China’s statistics bureau, inflation went up by a higher than forecast 1.9% in December.

The market fears anything that might mean less liquidity. And China is currently experiencing too much liquidity. China may raise interest rates by the end of June, and increase banks’ reserve requirements. On January 12, the People’s Bank of China raised lenders’ reserve requirements, also to curb liquidity.

In the end, we can’t have it both ways. Last year, and even now, there are concerns that potential asset bubbles may be forming in Asia, in particular in property. Seeing how badly the bursting of a property bubble can hurt an economy, I am sure no Asian government wants to go down that path. They would rather risk some unhappiness and volatility in markets now, rather than a much more severe one that might occur if such bubbles are allowed to continue forming unchecked.

Actually, I suspect that markets know this as well. Rationally, people understand. China is not in the same stage of economic cycle as US. China is experiencing very strong inflows, rising inflation, and potential asset bubbles. There is nothing “fragile” about China’s economic growth right now. If anything, the government is worried about overheating rather than like US, some double dip recession. But markets will be unhappy with the moves, and short term wise, there will be a knee jerk reaction because the immediate effect is that there will be liquidity drained out of the system, and that is likely to have an impact on the stock market.

However, I remain confident that fundamentally, Asia’s growth track remains strong. So, by tackling the potential problems that might arise, a longer term growth trend will remain intact. Markets are often near sighted, and in this case, they are focusing on the short term effects of China’s policy tightening. I believe that after the dust settles, and as China’s economy continues to grow, but with less fears that asset bubbles could develop, then we will see a surge back again in Asia’s markets. So, I took the opportunity during the two day’s corrections to put in more money.

bY Wong Sui Jau ON 22 january, 2010, 2:35PM (+800 GMT)

3 Stages of Building Wealth (Stage 1)

I am talking about 3 broad stages of building wealth today. Sometimes, it is important to revisit why we want to invest and where we are in our journey through life. Otherwise, it is easy to fall into the daily routine of working and forget about the big picture. People want financial freedom so that they are free to do whatever they wish to. It could be travelling the world, doing charity, taking up their favorite hobby full time, etc.

But in today’s society, you need money for everything, so unless you were born into wealth, it is likely that you would be working eventually. Yet, the very definition of financial freedom is that you won’t necessarily need to work anymore. Of course, some people love their jobs so much they don’t want to stop working.

My father is a good example. He has been teaching his whole life, and he is a great teacher. He is now past 60 year old, formally retired and he doesn’t need so much additional income that he must continue to work. Yet, he continues to give private tuition because it keeps his mind active, and at the root of it, he really loves to teach.

That doesn’t depart from what seeking financial freedom is all about. You still want to achieve that because you want that freedom to do what you desire, not feel that you are forced to work because you need the income. My father could stop all tuition tomorrow, and it would not affect his lifestyle one bit because he doesn’t need the income from giving tuition. For him, it is a choice, not a necessity. Hence, he has achieved financial freedom.

Achieving financial freedom is a journey and there are generally few stages everyone on this road has to go through. I would broadly classify it into three stages. In the first stage, which many of us are all in, we are all working and building up our wealth at the same time. In this stage, your primary source of income is from your salary (or business if you are an entrepreneur. Income from capital gains, investments, dividends, passive sources are all quite minimal at this point.

This is a very key stage, and if you are not careful, you will end up staying in the stage for a long time. Perhaps even up till retirement. This is the stage where although your primary source of income comes from the sweat off your brow, you won’t stay young and fit forever. You can’t work forever either (and most of us don’t want to!). So, in other to achieve financial freedom, we have to move on from this stage. This means we have to build up our passive wealth so that in time to come, it can supplement, then eventually totally take over as our primary income source. Passive is anything that can generate income or gains which can be spent. It comes from having a second house to rent out, stocks and unit trusts which give dividends and grow, or anything else. The key thing is that it must be wealth that is hard at work helping you to generate even more money all the time. If its income from a second job, or a second business that requires yet even more energy and time from yourself, then you haven’t created more wealth, rather you have created a second income stream but one that requires you to continue exchanging your time and energy for money. The goal in this first stage build your passive investment returns per year to a level where it equals your or approaches your yearly expenses by which time you would go on to stage two.

Let’s take an example. If you spend $30,000 per year. If you can build your passive investments to the point they are generating (including all passive income and capital gains) a yearly return of $30,000, then you would have passed stage one and arrived to stage two. When you have achieved this, even if you stopped working, you would at least get by. Yearly expenses here would refer to essentials rather than luxuries. When it comes to wants, the sky is the limit, and if you set a target on how much you want to spend a year vs how much you actually need, it would be a far larger amount. That will come later.

I will talk about later stages in another entry because most of us are still in this first stage and how we handle this stage is most crucial. Many people don’t even start this stage of building wealth. Instead, they keep spending everything they earn, without building up their passive wealth, and they stay in this stage forever. The first step towards progressing in this stage, is to spend less than what you earn, and to invest that money wisely. Try not to aim to big initially. You don’t have to set up the next Google business, or immediately buy a house to rent out. Start small, and build your way up. If you have only $100 to save each month initially, start from there. As long as you keep to it, eventually, you will have more to invest, and your investment options will automatically widen.

Stocks and unit trusts allow you scale from small to big quite easily without losing beat. While you can’t exactly buy a house and rent it out with a capital of just a few thousand dollars. You can start to grow your wealth through stocks and unit trust immediately with small amounts. Why do I not mention savings accounts amidst all this? The reason is because given the 0.1% interest rates which savings accounts offer, you will never get anywhere relying on them to build up your wealth.

There are many distractions and temptations for us during this stage as we try and build up our passive returns. Most of us are in the early to mid stages of our career life during this stage, so there will be a lot of material things we desire to buy during this stage. Be it buying a car, getting married, going on trips, buying nice clothes, i-phones, LCD TVs, there’s a long list of things we would love to buy during this stage. And when we have children, there are lots of expenses which come with those too as well (I have two children so I know!).

Take note though, that I am not suggesting we go into a hermit scrooge like existence just to get out of stage 1 as fast as we can. We would hate our life, and we won’t be able to keep up some bread and water existence just so that we can save up more money. The idea is to do everything in moderation. Plan it out and be conscious that you want to save some money each month, track your expenses, and you should be alright (unless you have a spending problem). There are always some alternative which a cheaper, but doesn’t necessarily mean you will live in a miserable existence. Take food for instance. There are lots of yummy food at relatively cheap prices (we are talking about Singapore here!), and there are also lots of yummy food at high class expensive restaurants. You just have to choose not to go to those places all the time and you will be surprised how much of a difference that makes.

In conclusion, this first stage of building up your wealth is the hardest, and often the longest, but if we know where we are going. We can all get through this stage! There are few short cuts to this stage, and few people are able to zip through this stage in a short time (meaning a few years). Accept that this stage will take a while, but if we keep at it, we will eventually past this stage onto the next!

bY Wong Sui Jau ON 19 january, 2010, 4:55PM (+800 GMT)

Which Markets Are Hot Off The Blocks So Far In 2010

Guess which market is the strongest so far off the blocks in this new year? Most of you won’t get it, I didn’t expect it myself. But it’s the Turkey market. The only Turley equity fund we have is currently up 7.4% year to date, which is quiet impressive considering most funds are only up 1 to 2% since the start of the year.

Why are we looking at such a short time frame? Its barely one week since the year started in terms of business days. I find it interesting because we are at the start of the new year. Certain markets which surge ahead of others could indicate how certain trends will form for the rest of the year. Do note that the information I am posting is just based on the preliminary trends of markets in the very first week of 2010. It is possible that other trends may appear overtake the current leaders. There is certainly no guarantee that the strongest performers at the start of the year will continue on to be the best performers in that given year. But for now, it is still interesting to look at who was quickest off the block in 2010.

Will Turkey end up being best performing market for 2010? Still very hard to say, but at least at the start of the year, it is going strong. Here’s how the rest of the funds by category (not exhaustive) have performed in the one week since January 2010 started. 

Now, this is by no means predictive. One year is a long time. But if we assume that the trends that people latch on to at the start of the year are going to carry through to the rest of the year, these numbers tell us a few things.

Firstly, that commodities, especially hard commodities will continue to have strong momentum. After Turkey, the funds with the strongest starts were gold, resource, and materials equities funds. These are all funds investing mainly into hard commodities. Are people still worried about inflation? Are people still wary that markets might collapse?

I don’t think its that. Most funds are off to a positive start, so many more people generally positive that this year will be good. But inflation, which has been low, is expected to pick up, and globally, trade is expected to increase as well, which means demand for raw materials like metals, will go up. This is probably why these funds are off to a great start for 2010. The same goes for energy funds. With oil prices off to a strong start at the beginning of the year, energy funds did well. Amongst sectoral funds, global finance funds and global agribusiness funds have also been strong at the start of the year.

Indonesia continue to be have really strong momentum. Despite being one of the strongest markets last year, it is off to a strong start this year as well. Valuations are already higher due to the strong run up, but it appears that momentum will continue to be strong in this market.

Emerging markets, in particular Latin America and Eastern Europe are the quickest off the blocks at the start of 2010. The Latin America funds are up 3.4% and the Eastern Europe funds are up 3.3% on average, And this is higher than the Asia excluding Japan funds which are only up 1.59% at this point. Again, I stress that it is too early to tell, and these are just based on the first week numbers of 2010. Nevertheless, could this be a case where other emerging market countries outside of Asia are increasingly coming under the spotlight? Asia excluding Japan, is after all a much more closely followed market with many well known exciting stories like China and India. But there could be a trend of investors diversifying their investments across all of emerging markets instead of just China and India. Time will tell.

The last interesting trend to note is that so far, just based on the initial performances of funds in 2010, the Singapore small cap category has done better than the generic Singapore equity funds category. There is some basis in this. Blue chips were the first to move last year, and many of the small caps have not really risen much in comparison to the blue chips in Singapore. As confidence recovers, we may see more of the small caps outperforming the blue chips. I am seriously considering shifting up to half of my Singapore equity fund into a Singapore small cap fund.

That’s all the thoughts for today. This will be an exciting year, and I have no doubt there will be new trends and changes during the year as it progresses. So, I will have updates.

bY Wong Sui Jau ON 12 january, 2010, 3:55PM (+800 GMT)

Emerging Markets Will Roar in this New Year

It’s a new year, I added $5,000 to my portfolio as follows:

Schroder ISF Latin America A ACC SGD - $1,000
LionGlobal Korea Fund - $3,000
Fidelity Eur Hy (EUR) - $,1000

Within Asia, South Korea is our favorite market for this year. But as a whole, I really like Emerging markets, and since I am already heavily overweight Asia, I added to Latin America to increase my exposure to other emerging markets outside of Asia.

I think markets are already off to a great start in 2010.The STI index is closing well above 2,900 points, and the Hang Seng Index has also breached 22,000 points. A lot of people are looking at markets with a new fresh perspective, and they are feeling positive about it.

Personally, I don’t just feel positive, I am very bullish. In particular, on Emerging Markets. Here’s why: a lot of the concerns, are still about what is happening in developed countries. What happens when governments pull back on stimulus spending at the end of the year, what happens if the US economy goes into a double spin? What happens if US dollar crashes. The thing is, we had just gone through an extremely difficult 2009, where demand from developed markets fell drastically, the world was in a recession, etc, and through it all, the emerging economies just kept on chugging away.

So, if all these ongoing risks are centered on developed countries, then shouldn’t the people in the emerging markets feel a lot more confident? A lot of people claimed that because emerging markets, in particular Asia suffered massive falls in 2008 as developed markets slumped, there was no decoupling. This is true, to a certain extent. We live in a massively linked up world and it would be impossible for things happening in the developed world to not have an impact elsewhere.

However, as seen in the much stronger rate of rebound from Asian and emerging markets last year, there is now a difference emerging. The US and Europe banks will take some time to right themselves, and similarly, the housing boom fueled by subprime mortgages, now bust, will also take some time for US and Europe home owners to sort through. In the meantime, Asia, and the rest of emerging markets, will simply rebound faster, and forge ahead harder.

Many of the emerging market economies did not need the huge influx of help from government stimulus packages, nor did they have the luxury of such much cash injections. Their banks didn’t need the kind of bailouts that US and European banks needed either. This feared withdrawal of government stimulus packages will hardly have much impact on Asian and Emerging economies at all. Truth to be told, one year is a long time anyway, and I am confident that by the end of the year, most of the businesses in developed countries will be back on their feet as well already. The true economy will take over from there. By the end of 2010, it would be two year since Lehman Brothers crashed. If we still need government stimulus packages to keep economies going by then, we will be in trouble.

I foresee more economic power shifting to the emerging economies. The emerging market economies, led by the giants India, China, Russia and Brazil which together, make up more than 40% of the world’s population are in a unique position. Many have young populations, a much lower cost base, low household debts and strong companies with healthy balance sheets. This is in contrast to many developed countries which are struggling with a graying population, high household debts, and companies with big holes in their balance sheets.

Interest rates and inflation numbers are at abnormally low rates in 2009 because of the global recession. It will not always remain so low. Yet, an inflationary environment will also benefit resource rich countries like Russia and Brazil. (And China has massive oil companies which have been aggressively acquiring energy resources as well). With the stronger economic growth, we are expecting strong earnings growth of around 29% for 2010 from Emerging Markets. And even 2011 will see earnings growth rates of 19.5% as well. And yet, valuations of many emerging market countries remain reasonable. (Russia and Brazil are trading at P/E ratios of below 14 times).

This doesn’t mean developed countries are about to roll over and die. I am probably more hopeful about them recovering than many simply because when we are talking about markets, we are talking about the companies listed in these markets. These are all run by smart people. They know where the growth is. Global companies will all be trying to expand into emerging markets, where the potential for growth is so much greater. Those that succeed will benefit from it as well.

For those of you who are already invested, I hope you have rebalanced your portfolio. I think this year will be a good one, so its ok to take a bit more risk. For those that have not and are wondering if it is still alright to get back into markets. Yes, it is. We are only at the start of 2010. Markets will not shoot up 30% within two weeks. So, there is still time, but of course, the longer you wait, the higher market will move up. Don’t wait until everyone is already in the market, and nobody is worried about government exit plans, or double dip recessions anymore. There are still decent gains to be made this year.

bY Wong Sui Jau ON 5 january, 2010, 5:05PM (+800 GMT)