Wealth Management Singapore

The past 3 months has been a ride for most investors and money managers. With a variety of issues such as Yuan value, China property bubble, European debt crisis, stake holders have been watching each reported data like hawks and volatility shot up.

We have reached a stage where things have settled down a bit. And also arrived at a realization that there is going to be a new normal in the global economy. I do feel that the new normal is a good thing if it eliminates the pattern of peaks and troughs in the economy.

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Singapore’s growth accelerated to a record 18.1 percent pace in the first half of 2010, spurring the currency, putting pressure on policy makers to check inflation with a stronger currency, and putting the island on course to be the fastest-growing economy in the world this year.

The government predicts GDP will rise 13 percent to 15 percent in 2010. Credit Suisse Group AG and Oversea-Chinese Banking Corp. forecasts for the island’s expansion this year range from 12.7 percent to 16.3 percent among the economists surveyed by Bloomberg.

By comparison, Goldman Sachs, BNP Paribas and Macquarie and China International Capital Corp estimates for China range from 9.5 percent to 10.1 percent in recent weeks.

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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.

Europe

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.

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You will have heard me mention the Greek sovereign debt problem before. In February, this issue has been weighing down the markets somewhat pending a response from European Central Bank. Last Thursday, a serious contagion forced ECB to response seriously with a huge EUR750 billion safety net to arrest the fiscal crisis and stop the turmoil from spreading to the other 15 nations that use the euro.

Bank of America – Europe Bailout

Markets have been really volatile last 2 weeks due to this issue, other issues like China’s property prices and inflation do not help in calming the market. Main story goes, after the drop last week, traders and investors gave positive response and the markets for fixed income, equity and Euro rebounded on Monday, a day after hard fought European lifeline.

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Global economic recovery
Evidence of a global economic rebound leads the news of the past week. Reports showed a recovery in manufacturing in the U.S., China, Japan and Europe. February had experienced a correction in the market in general due to problems in Greece, stimulus exits and uncertainty over the extent of recovery.

U.S. Employment Data
Employment in March grew by the most in three years, representing a turning point for the labor market as U.S. market recovers from the deepest recession in seven decades. Payrolls rose by 162,000 workers, the third gain in the past five months and the most since March 2007. Unemployment was 9.7 percent for a third month. Jobs report makes it `pretty clear’ recession is over.

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Markets
The MSCI Asia Pacific Index has rallied in the past six weeks as concern over monetary tightening and Greece’s debt receded, and as companies reported better-than-expected earnings. The Index has gained about 9.5 percent from its lowest level in more than two months on Feb. 8, as better-than-estimated U.S. employment data and a pledge of support from French President Nicolas Sarkozy for debt-stricken Greece bolstered confidence in the global recovery.

The average price of stocks in the index has risen to about 19 times estimated earnings from 18 at February’s low. The world economy will expand 3.9 percent this year and 4.3 percent in 2011, following a contraction of 0.8 percent in 2009, according to IMF estimates released in January.

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New property rules

Government steps up moves to cool the sizzling property market yesterday.

First, anyone who sells a property within a year of buying it will have to pay stamp duty of around 3 per cent. This is on top of the stamp duty you had to pay on the purchase.

Second, lending institutions will now be allowed to lend only up to 80 per cent of the purchase price, not 90 per cent. Buyers will have to come up with at least 20 per cent themselves. Housing Board loans are not affected by this change in what is called the loan-to-value (LTV) limit.

The sellers’ stamp duty will hit short-term speculators, observers said, while the change in the bank loan limit is likely to weed out marginalised buyers. The measures will affect only a limited number of buyers but experts feel they could have a psychological effect on the market. There is also concern that tougher steps are in the pipeline.

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The MSCI World Index of stocks fell for a sixth day, its longest losing streak in almost a year. The global index of equities in 23 developed nations retreated 0.4 percent as at 27th Jan morning New York, bringing its six-day slide to 5.4 percent.

Greek bond yields surged to a 10-year high amid concern growing sovereign debt will derail the economic recovery. The yen and dollar gained as commodities dropped.

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China Trade Rebound Aids Global Economic Recovery
China’s exports surged in December 2009 to make it the 2nd largest exporter in the world. Imports rose to a record in a stronger-than-forecast trade rebound that may lessen the case for governments to sustain stimulus programs this year.

Exports climbed 17.7 percent from a year earlier, the first increase in 14 months, and imports jumped 55.9 percent. Year-on-year comparisons are affected by the tumble that began in late 2008, when the global credit crisis deepened. Shipments to the U.S. and the European Union grew 15.9 percent and 10.2 percent respectively from a year earlier. Imports from Australia and Malaysia more than doubled.

Soaring imports are more evidence that China’s economy may face an increasing danger of overheating. Chinese government, while warning that recovery is not yet solid, pledged to “guide” speculative flows, bank loans and property lending. China is expected to raise interest rates and let its currency appreciate in the coming months as policy-makers resort to more aggressive measures.

Countries like Taiwan also experienced surge in exports while Australia and New Zealand markets and currencies gained on bets their economies will benefit from the increase in shipments to China. Among other points, the International Monetary Fund has said it will probably raise its estimate for 2010 world growth from 3.1 percent.

Trade Rebound Aids Global Economic Recovery

Analysts bullish over earnings season
In Singapore, as earnings report for Q4 and the full year 2009 goes into full swing next week, analysts are expecting good results for all sectors given the cost cutting measures and rebound in economy in 2009. Except for the volatile biomedical sector, which is not represented in the local stock market, all sectors grew in Q4 last year.

Analysts bullish over earnings season

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.

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