It was nothing short of a bull market since the start of 2018 with the US market jumping higher and higher. The three major US indices kept on creating record highs as the Dow Jones Industrial Average (DJIA) hurdled past the psychological 25,000-mark, which was a dream level especially when the US bull market has been surging for the past nine years.
DJIA first went past 25,000 points on 4 January 2018 when US President Donald Trump became an analyst himself by predicting that the index could surge by another 20 percent to reach 30,000 points! How many world leaders would make such a statement? Trump has made himself synonymous with the stock market, and that means stocks would go even higher!
During the one-year period from 8 November 2016 to 8 November 2017, when Trump was the US President, the DJIA actually surged 28.5 percent – a jump not seen since 1945! He claimed credit for the Bull Run; he has been talking up the stock market; and his comments have pushed the DJIA up 37.9 percent ever since he became US President. Can it go even higher? What does Trump have up his sleeve?
Many have claimed that the corporate tax cuts have been responsible for the Bull Run, but I believe there are other factors such as the US$1 trillion infrastructure development as well as the abolition of Obamacare. He has also been encouraging companies to invest in high tech ventures resulting in Foxconn’s US$10 billion investment of factories in the US.
The bullish US market lifted global stock markets to new highs, including Shanghai’s 11 days of consecutive gains as well as Hong Kong’s 14 days of consecutive winning streak.
On 15 January 2018, the Hang Seng halted its 14-day winning streak after it rose to 31,733 points – a mere 0.71 percent away from its historical high. China A-shares lost momentum and were drifting until it fell in the afternoon putting pressure on the Hang Seng Index (HSI) resulting in the latter shedding 468 points in one afternoon. Nevertheless, the HSI fell a mere 0.23 percent if not for a late pullback before the closing.
Of some worthy note is that the CSOP FTSE China A50 ETF (2822.HK) rose 1.2 percent while the iShares FTSE A50 China Index ETF (2823.HK) jumped 1.24 percent despite the Shanghai Composite Index falling by 0.54 percent. This signifies that investors continue to be bullish in spite of the correction.
In addition, it is also worth mentioning that most HSI component stocks fell on most days when the Hang Seng chalked up the 14-day winning streak. This is because the index was propped up by the heavyweights such as HSBC (0005.HK), which has been rising since August last year.
It is evident that the bullish Hong Kong and Singapore markets are setting the stage to retest the 2007 highs. However, it is also clear that the current Bull Run is a far cry from the 2007 rally as we have yet to witness euphoric sentiments, which also means that the current Bull Run still has plenty of upside! There are plenty of investors waiting at the sidelines, waiting for a correction to come before entering the market.
Oil prices have been rising but related stocks have yet to rise in tandem. The share prices of PetroChina (0857.HK) and Sinopec (0386.HK) still lag the broad market but there are bright sparks taking place since the start of 2018 as investors chase after laggards. Look out for Keppel Corporation and other related stocks as I believe their share price may appreciate.
With the improving economy, we can expect the share prices of Singapore Airlines and Cathay Pacific Airways (0293.HK) to rise alongside other transportation-related stocks. It was reported that Kingboard Chemical Holdings sold its nine percent stake in Cathay Pacific Airways at HK$13.60 per share, resulting in the share price of Hong Kong’s carrier falling all the way to December 2016 before it bottomed.
The share prices of Macau’s casino players take a bashing whenever news of capital outflow controls are being imposed by the Chinese government. But more often than not, prices tend to rebound hence I would recommend that retail investors take advantage of dips.
I am bullish about the casino sector because 1.3 billion people in China are becoming richer with each passing day. As the one and only casino operator in China, Macau will benefit from the inborne gambling nature of the Chinese race. Lately, the research houses are becoming more bullish on the gaming sector in Macau as visitors averaged about 30 milllion, which is 50 times more than the population of Macau. With the Hong Kong-Zhuhai-Macau Bridge near completion in 2018, visitors to Macau will invariably increase.
Fake news in Singapore? The Singapore government has taken steps in curb fake news on the internet space which, in my view, is a necessary step that Singapore has to take. The stock market is rife with rumours but how do we differentiate between pure rumours and manipulative rumours? There are plenty of ways for syndicates to spread malicious rumours through adoption of technology. How do we stop them? This is not an easy task especially when these rumours originate from overseas.