Nov 05 2009

Q&A with Aberdeen Asset Management’s strategist Peter Elston

Published by jennifer-alejandro under Uncategorized

 

 

Peter Elston, Aberdeen Asset Management

Peter Elston, Aberdeen Asset Management

 

Here is a snapshot of my interview today with Aberdeen Asset Management’s Strategist (equities and fixed income).

Have a good trading day ahead.

Q1.The US Federal Reserve keeps rates steady in a range of zero to 0.25 percent. When will the Fed start raising rates, when Australia has already hiked rates twice?

Australia has hiked rates twice because its economy is at risk of overheating as a result of strong commodity exports to countries like China. The US does not have this problem, nor is it likely to for at least the next few months. Much of the growth seen in the third quarter was the result of government stimulus schemes such as cash-for-clunkers and there are few signs, if any, that the economy can support itself without government help. At the same time, the zero interest rate policy is playing havoc with the dollar. Although secretly US officials may welcome dollar weakness, publicly they must talk about wanting a strong, stable dollar. But the priority for the US right now is growth, so I suspect rates will remain low for some time to come.

Q2. The Fed has never raised rates until the unemployment rate has peaked.Are we close to a peak and what can we expect on this Friday’s jobs data?

We could be 6-12 months from the peak. Companies are still announcing lay offs, the latest being Johnson & Johnson and Noklia Siemens. Unemployment will start to fall when corporate investement starts to pick up. This is unlikely to happen soon because capacity utilisation rates remain at record lows. Furthermore, the banking sector is still unable to extend loans as the government would wish. Finally, government spending is crowding out the private sector, making it even harder for companies to consider increasing capex right now.

Q3. What about talks that the Obama administration may introduce a second stimulus plan, how likely is this?

A second stimulus plan is something that I think the Obama administration would want right now, given that the economy remains weak. The problem is how it gets funded. Already we have seen the average duration of US government debt falling to record lows as the Treasury has been forced to fund at the cheaper, but shorter, end. Thus scope for further stimulus is certainly more limited than it was a year ago.

Q4. Given that stocks are up broadly in the past eight months, including a 55% gain for the S&P 500 since early March, and earnings season is winding to a close. Are economic signs going to give the market direction as the year winds to a close?

We think that loose monetary conditions could carry stocks higher in the short term but that a relapse for Western economies next year would result in a market correction. It is certainly a very difficult environment in which to invest and one in which investment mistakes very easily can be compounded.

Q5. When you look at the fundamentals out into 2010, it’s still a mixed bag. Should investors be backing away from stocks?

Stocks are driven by supply and demand and you don’t get much more fundamental than that. Thus in the short term we expect markets to continue to be driven by what Nouriel Roubini has called “The Mother of all Carry Trades” in which purchases of risky assets are funded with cheap US dollars. But this cannot last forever and so we expect a significant correction at some point, probably in the first half of next year. Thus as you suggest investors should be thinking about backing away and not worry if they sell too early. Of course if you sell, you must remember to buy back. Which is why if you have a long investment time horizon I wouldn’t worry about corrections. The long term picture for Asia is very rosy.

Q6. Looking at specific industries: where are the pockets of growth, going forward?

Asian banks should do well, particularly those with good capital ratios.
Commodities companies look well supported. We still think that the story for Asia is about the growth of domestic demand, which will be focused both on investment and consumption. China, for example, is very aware of the need for social stability. A way to to achieve this is by encouraging its people to have the confidence to consume, to enjoy their rising purchasing power. On the other hand, an industry that will continue to struggle is the container shipping industry. Huge over supply issues and the chance of big bankruptcies.

Q7. Ahead of funds’ book-closings as the year-end approaches, are we seeing profit-taking on risk assets already, especially in equities?

I suppose so although I have never really understand how much of an impact this has. It certainly never has a permanent impact. And for every investor who may be booking profits, it seems there are ten who missed the rally and are thus waiting for an opportunity to buy.

Q8. Will the funds book closing offer an additional boost to the dollar?

Perhaps, although I don’t think this will be a significant factor. There are so many other, more powerful forces driving the dollar down. But predicting currencies is a dangerous game and it’s very possible that the carry trade could be reversed sooner than we expect.

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Oct 13 2009

Asia Market Strategy

Published by jennifer-alejandro under Uncategorized

Tey Tze Ming, Saxo Capital Markets

Tey Tze Ming, Saxo Capital Markets

 

Here’s my Q&A with Saxo Capital Market’s Asia Pacific Strategist, Tey Tze Ming.

He is mildly bearish in the short-term but sees things picking up in 2010 and stocks higher a year from now.

Q1. The latest quarterly reporting period is off to a strong start. Is there enough room for upward movement?

I would say it’s too early to judge at the moment. Next week might be a better time to ask as we’ll have a much clearer picture of how things are shaping up. Some noteworthy stocks reporting this week, JPM(Wed), Citi (Thurs) and BankofAmerica(Fri), the banks are usually a good gauge of how things are going.

As to whether there is enough room for upward movement, I think the problem is that we have rallied perhaps too much in the last quarter. 3 months back as we looked at Q2 earnings and saw ‘green shoots’ of a recovering economy, the stock market has ralled by 23% in these 3 months.

This sets the bar for earnings season this quarter extremely high, as we’ll need to see a corresponding increment in earnings to justify those valuations at the moment.

Q2. We continue to see small pullbacks followed by rallies on expanding volume. Are equity buyers still waiting on the sidelines to get on board the train?

It does seem that after a patch of bad news, equities seem to bounce right back. I think more and more investors are piling back in the market, not just your regular retail investor, but institutional money also seems to be on the rise. Of course, the liquidity and accomodative interest rate policies in place around the world is also helping to attract investment again, not to mention the demand generated from all these fiscal stimulus packages in the West.

Q3. The Dow hit a one year high last Friday. When do you expect a market pullback?

The main risk for downside that we need to be looking for is for poor sentiment arising from disappointing numbers this reporting season. Not disappointing in terms of suprising on the negative, but just projected earnings that are lower than expected could put equities lower from current rich valuation levels.

Q4. Will the US economy return to positive growth in the fourth quarter?

Yes, but barely. At Saxo, we reckon that the global and US economy has indeed bottomed out sometime during Q2, 2009

Q5. With US unemployment at 9.8% last month and the economy still losing jobs at an elevated pace. Are fears about a W-shaped economy, otherwise known as a double-dip recession, overblown?

The housing market and unemployment in the US continue to be a problem. I think a w-shape double whammy is unlikely to occur, as recent data is showing that the economy is turning around and the bad news we have seen is slightly negative data, but nothing major or catastrophic to put equities towards the March lows we have seen. A negative surprise in numbers this season might put the markets back 8-10% lower, but unlikely to see panic selling and equities at firesale prices again.

Q6. Are you anticipating the Fed to raise rates anytime soon and will such talks spook the stock market?

Our expectation is that the Fed will not move until March 2010 at the very earliest. They have a tough job of managing potential inflation problems along with an accommodative policy. I doubt that a Fed move will spook the market and in fact, could be viewed as further proof that the recovery is robust enough to take a rate hike, further improving sentiment.

Q7. Most indicators of economic activity are stabilising, but at very depressed levels. What’s the best investment strategy right now?

We expect the pace of economic recovery to be slow and gradual. Investors should be looking to buy on dips and be prepared to hold for some time. Risk factors to look out for would be inflation as well as choppy markets as investors grapple to gauge the pace of recovery.

With a investment horizon of 1 to 2 years out, equities definitely look like a winner here.

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Sep 11 2009

CHANEL: iconic jewellery

Published by jennifer-alejandro under Uncategorized

I had a chance to attend the CHANEL jewellery show Bijoux de Diamants exhibition in Singapore.

All the sparkling pieces featured are from Chanel’s first ever fine jewelry collection unveiled in 1932.

The 70 vintage pieces are made up of diamonds set in platinum. The theme is Constellation.

Why constellation? Because the jewelry is said to be about wishing stars and dreams.

Coco Chanel designed necklaces without clasps, where comets with diamond tails shoot across the neck.

The signature piece is called “Comet” or as the French would say,”Comete” . The shooting star for wishes to come true.

Chanel’s jewelry collection came amid the Great Depression.

It’s a parallel between then and now, amid the financial crisis.

In the fashion world and beyond, “Chanel” is synonymous with elegance, style and wealth.

Simple but elegant. A big white tent housed the Chanel Bijoux exhibition amid the green lawns of colonial-era Fort
Canning park.

I noticed, Chanel jewelry has deliberate irregular settings. Very fluid. Oh did I mention, very expensive?

The Collier Comete or Comet necklace is worth over 1 million Singapore dollars (more than US$800,000).

Comet necklace is worth over over 1 million singapore dollars with more than 200 brilliant cut diamonds. Coco Chanel designed necklaces with no clasps.
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Jul 03 2009

Remembering Michael

Published by jennifer-alejandro under Uncategorized

When news of Michael Jackson’s death spread, it was amazing how everyone seemed to be talking about it.  On facebook, 90 percent of status messages were about Michael. On Amazon and iTunes, the top sellers were his old albums.  When you visit retail stores, his songs are being played everywhere.

It seems that in life and in death,  Michael attracts the spotlight. 

Honestly, I haven’t thought of Michael or his music in years. But watching all the video tributes about him on television and on Youtube, I was surprised to realize how much he has impacted a generation. My generation.

Watching his videos, especially those from the albums ”Off the Wall”, “Thriller” and “Bad” –  rekindled memories of grade school and high school days for me.  His music, his fashion and his dance moves. Who could ever forget the moonwalk?

His videos are classic.  “Thriller” was directed by John Landis while “Bad” was helmed by Martin Scorsese.  The video he did with sister Janet, “Scream” , (if I’m not mistaken) still holds the record for most expensive video ever made at US$7 million.

More than that, Michael was a true superstar in the sense that his music bridged cultural and racial gaps and successfully mixed soul, R&B and pop. His signature dance moves were created by him and showed his creative genius in all aspects of performance.  He was ahead of his time.

I just wish that the world could have witnessed his comeback concerts.  FIfty shows that were all sold out. Footages of his last rehearsals seem to point to what could have been a spectacular event.

At the end of the day, whatever opinion you may have of MJ — an icon, a musical genius, awesome dancer, total performer or a freak show —  one thing holds true,  we may never see anyone like him again. 

Michael, you will be missed.

 

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