Archive for the ‘Asia’ Category
2012 – The Year Where It Happens
What happens? Actually, there are cross roads in 2012 for a lot of the economies. Back in 2011, it was said it will be a year of 2 halves. Now in 2012, that is being brought up again. I do think volatility will be lesser in 2012 as compared to 2H 2011.
U.S.
The economy has probably picked up speed in the last few months and will grow moderately in 2012, staving off the need for additional stimulus from the Federal Reserve, a Reuters poll in December. Payrolls rose 200,000 in December, double the gain in November. A weekly measure of consumer confidence ended 2011 at a five-month high. And manufacturers reported their business in December grew at the fastest pace in six months. Companies added 1.64 million employees in 2011, the best year for the American worker since 2006, after a 940,000 increase in 2010. Even with the gains, little headway has been made in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009. GDP grew 1.8 percent last year, according to the median forecast of economists surveyed by Bloomberg News.
Even though the jobless rate dropped to 8.5 percent, it is still very high. And the massive US$15.17 trillion debt is slowing rolling into the world’s concern. In 2012 GDP is estimated to expand by as much as 2.5 percent.
China
A fast growing economy always have numerous threats that surfaces. For China, the threat of inflation retreated somewhat with authorities considering lowering interest rates for the first time since 2008. China’s home prices fell for a fourth month in December, something the government hoped for in addressing a possible property bubble. Hard landing probability lowered with small manufacturing growth from China. However, there appears larger and not so visible signs of trouble. Local government debt through investment and financing platforms have attracted borrowings of conservatively estimated 10 trillion Yuan. The funds are used for infastructural and property projects and the key concern now is repayment.
To meet their commitments local governments need to generate income from land sales, which is fuelling unrest in the world’s second largest economy as residents increasingly complain that land is being unlawfully seized. A recent downturn in China’s housing market will also weigh on the finances of cities and provinces that had planned to pay off debt by selling land at high prices. Corruption allegations against local governments’ methods to raise money and pay debts have culminated in protests, another source of roadblock for economic growth.
Of Art and Wealth
I have been meaning to write about art investments for some time. According to Merrill Lynch Global Wealth Management and Capgemini, Singapore’s millionaires are quite fond of having art as part of their investments in luxury items, at 26% of value of luxury investments. The top preference are small items: gems, watches and other jewelry.
Investments in art is not only restricted to the very wealthy. As the middle-class art buyers in wealthy Singapore grow, galleries are aiming lower, taking advantage of an art-buying boom. Growth of so called affordable art and second Affordable Art Fair is reported HERE.
I recently met a friend who started a online Art portal for emerging countries’ artists – www.artyii.com. She wrote an article for Business Times as an introduction to art investment.
Market Updates October 2010
I have decided to put forth my thought on portfolio strategy first
For clients with substantial portfolio, will look into entering the US market as a diversification. I believe US market is in a better place now, but returns of US market will likely be lower than growth markets. (note: a market need not be in a good place, lesser risk more upside to rally, as can be seen previously). US equity has been in the overbought region. As shown below, the S&P 500 index has been trading within the red zone (between 1 and 2 standard deviations above the 50-day) for some time now. It seldom goes above 2 standard deviations and everytime over the last 10 years it reach, it pulls back.
I still favour Asia and emerging markets, especially some of the less mentioned regions like Indonesia, Brazil, South Korea and South East Asia. I favour markets with good domestic consumption and commodities driven mix. It does seem like the markets are very correlated nowadays.
For fixed income I favour Asian emerging market bonds and high yield bond market. Lower risk fixed income will go to SGD, AUD money markets, countries more developed but stable.
Commodities have run up quite a lot and I believe it is a long term story. Pretty hard to reach a convincing conclusion about outperforming equity markets now.
Capgemini & Merrill Lynch Asia-Pacific Wealth Report
Every year Capgemini and Merrill Lynch Global Wealth Management will publish a World Wealth Report, in its 14th year now and also a Asia-Pacific Wealth Report, their fifth annual in-depth look at the high net worth (HNW) marketplace in the region. Both reports are the result of an extensive collaboration between the two firms, studying the key trends that affect high net worth individuals (HNWIs). It is really interesting read.
Download page here. Alternatively, you can ask me for a copy.
Asia-Pacific HNWI segment showed substantial gains in 2009. The combined wealth of Asia-Pacific millionaires surged 30.9 per cent to US$9.7 trillion in 2009, erasing losses in 2008 and surpassing Europe’s rich. More relevant to me is how HNWI invest. Some of the findings below.
Read More…
May – A Volatile Month With 2 Tales To Tell
May has been a volatile month. Europe’s sovereign debt risks and tensions in Korean Peninsular weighs down heavily on the financial markets while economic data has shown that the recovery is underway.
Speculation and intense debate on 2 issues, whether Greece will be forced to default and whether Euro will lose some of its weaker member countries has died down a little. However, things are still not certain a month after attacks lead to a trillion dollar bailout package. Euro skeptics say the forced spending cuts and tax increases will scuttle a recovery before it takes hold. The fiscal austerity measures will be a big drag on growth. Spain lost its AAA credit grade at Fitch Ratings, dropping one step to AA+ to a “stable” outlook.
End Of The Year Update
2009 end of the year update
2009 has been a year of recovery, first in share markets & then in global economic activity. Patient investors have seen some recovery in their wealth after the losses of 2008.
The perception of risk is still out of balance. While government bonds are expensive and there is still a lot of money in cash, equities and corporate bonds are no longer cheap.
Outlook for 2010
2010 is likely to see the economic recovery continue and become self-sustaining. Interest rates likely to be kept low by the US and the Europe.
A ‘U’-shaped recovery is most likely, which in some ways is the best outcome for investors. A ‘U’-shaped recovery presents investors a chance to enter the market when asset prices remain low. Global GDP growth in 2010 is at 3.6%-3.8% according to consensus.
Share markets are likely to rise further thanks to the combination of improving economic and profit growth, low inflation and still low interest rates at time when there is still plenty of cash on the sideline.
However, with uncertainties about the strength of the recovery and key central banks moving towards rising interest rates in the year ahead, share markets will be more volatile and gains more constrained than has been the case since March. A well-diversified portfolio should help to smooth performance.
Asian countries lead the world out of recession.
Oct 27 (Reuters) – South Korea’s economy grew at its fastest rate in 7-½ years in the third quarter, joining China and Singapore that have also reported faster growth in Asia in the September quarter.
In the Asia-Pacific region, Japan, Singapore, Hong Kong, Thailand, Taiwan and New Zealand all pulled out of recession in the second quarter, although the recovery is expected to be gradual.
In Europe, Germany, France and Sweden have also announced a return to growth, however Britain’s economy, by contrast, contracted in the third quarter.
On Inflation And Recovery
Yesterday, the Australian and New Zealand dollars traded near the highest level in 10 months after Reserve Bank of Australia Governor Glenn Stevens said he will have to raise interest rates at some stage as the economy recovers. This is to guard against inflation.
Elsewhere, global fund managers are betting China will let the yuan strengthen for the first time in more than a year to keep inflation at bay following a flood of foreign capital and record lending. New loans in China almost tripled to $1.1 trillion this year, contributing to a 60% surge in property sales. A US$585 billion stimulus plan helped July’s retail sales rise 15.2% from 2008. Reserves swelled to US$2.1 trillion on June 30 after a record quarterly jump as overseas investments led China to sell yuan to hold it down. The Shanghai Composite Index, Asia’s second-best performer this year with a gain of 72%, is in “bubble territory”.
The predicted appreciation in Yuan pale alongside six-month rallies of 18% and 14% for the Indonesian rupiah and the Korean won.
All these bodes well for Asian currencies and fund inflows. Asian stocks rose after the U.S. Federal Reserve said the recession is easing and pledged to keep interest rates low.
U.S. Federal Reserve statement on Wednesday provided 3 points which boosts the market. Firstly, Fed pledged to keep interest rates low, boosting share prices on a short-term basis. Secondly, Fed said the U.S. economy is “leveling out”, meaning it is time now to wait for positive signs. Thirdly, the Fed will stop buying U.S. treasuries directly from the U.S. government by October. This is seen as a huge sense of confidence by the Fed and also made countries holding huge U.S. dollar reserve happy.
Short-term volatility will still be present. This week, Shanghai Composite Index fell, completing the worst week since February, on concern this year’s rally has overvalued the prospects for earnings growth.
As medium to long term investors, you should concentrate on the second and third point stated above. These 2 points points to a positive outlook over 3 years period, especially in Asia.
