On 5 May 2018, Shares Investment Conference 1H2018, we invited market veterans and equities experts to shed some light on how some of these major events would unfold. Retail investors also had the chance to raise their concerns about issues ranging from US-China trade wars and unrest in Syria to US Tax reform.
More importantly, our invited speakers also shared their market outlook and advised investors on how to position themselves and their portfolio. For the benefit of all those who were unable to attend our conference, here is a recap on some of the things the experts said.
Dr Chan Yan Chong – China Would Likely Make Concessions!
On the changing international trade dynamics, renowned veteran Dr Chan Yan Chong compared US President Trump’s strategy to that of Zhang Yi who was an important strategist of Wei state during China’s historical warring states period.
Metaphorically, Dr Chan theorises that Trump is using preferential tariff treatments to pressure other countries to renegotiate trade terms on a bilateral basis. Just like Zhang Yi who was instrumental in dissolving the unity of other states, Trump’s strategy is also forcing other countries to realign their alliances.
US-China trade tiff has dialled up a notch and taken the form of a technology war. US ingenuity has given the country an unparalleled edge in technology that cannot be matched by any other country. As a result, when the US banned sales of US electronic components to China’s ZTE, the smartphone maker’s production came to a halt.
The existential crisis faced by ZTE is a warning shot to China that the US can still hurt the world’s second largest economy. Consequently, unlike the tit-for-tat response that China gave when Trump slapped tariffs on its goods, the Chinese government took on a softer stance this time.
While the Chinese has indeed the scale to produce their own electronic components, the technological gap with the US is simply too huge to close in a short time span. For many of the Chinese electronic producers, switching to domestically-produced semiconductors would inherently compromise the performance and hence the competitiveness of their products.
That said, though the prospect of a full-scale trade war would indeed send shivers down the spine, investors should not be too enthralled. Ultimately, as Dr Chan explained, China’s government would likely make some concessions since opening up its economy is in-line with its long-term strategic goal anyway.
Buck Tan – Growth To Transit To Domestic Sectors!
While US equities have risen tremendously since Trump was elected as the President, market veteran Mr. Buck Tan expressed his concerns for the US economy over the long run.
As Mr. Tan pointed out, Trump’s tax reform package would cause an expansion in the federal deficit and hence raising the US credit risks. This would create an overhang for the US Dollar over the mid-term horizon. Meanwhile, a tightening US labour market also means that Trump’s tax cut would have limited impact on the country’s gross domestic product.
For Singapore, Mr. Tan believes that the export-led growth in the past year will transit inwards to boost the domestic sectors, such as property developments, REITs, the financial sector and the entertainment sector.
Elaborating further, Mr. Tan explained that you can literally “see it”. Strong manufacturing and export-led growth has translated to higher income that has raised the demand for properties. Correspondingly, banks become the beneficiaries of higher economic activities, notwithstanding the widening net interest margin in a rising interest rate environment. With less worries, people will also spend more on entertainment and gaming.
However, Mr. Tan also advised investors to stay away from construction, telecommunications, healthcare and transportation and aviation-related stocks. In addition, investors heavily invested in the offshore and marine sector should be careful as the current news flow is hyped and has yet to translate into better fundamentals for companies.
Jane Fu – US Is Midst Of Recovering Lost Gains!
According to sales Trader and specialists from CMC Markets Jane Fu, the US market will move in three phases in 2018: Open high, correction, rebound.
We have already seen the first two stages unfolded. In the beginning of 2018, investors continued their exuberance with the “Trump effect”. In March, the frothy stock valuations ultimately led to a correction.
If Miss Fu is right, the US stock market is in the third phase of her prediction – rebound.
According to Miss Fu, effects of the US tax cut reform have yet to fully be felt. With a higher disposable income, US retail investors have more savings and hence would channel them into the US stock market come mid-2018. Collectively, this would be substantial enough to put the market back on the upward trajectory.
Sean Seah – Have A Systematic Approach When Bargain Hunting!
Founder of Value Investing College Sean Seah advocates a systematic approach in investing when we are endowed with a seamless flow of information. Investors should ask themselves what the implications of the new and then implement a strategy.
Citing example from Warren Buffett’s big bet on Phillips 66, Mr. Seah highlighted that while some events can dampen sentiments and stock prices in the near-term, these “trading noises” may not be impactful on companies’ fundamentals. Such are the opportunities to load up on the stocks. For instance, protectionism of US steel industry could potentially raise the profitability of US steelmakers. Even if it does not materialise, at worst, nothing changes!
Goh Mou Lih – Bear No Fangs Yet!
In November’s conference last year, Mr. Goh Mou Lih expressed that private property prices have seen the bottom and higher enbloc activities would mean developers were likely to ramp up the pace of raising property prices.
As predicted, these trends materialised in 1H18 and enbloc activities have pushed down vacancy rate dramatically. If strong economic growth in Singapore sustains in 2018, Mr. Goh anticipates that private property prices would hit new highs by 2019.
Illustrating his optimism, Mr. Goh believes that the bear market has yet to rear its ugly head. From his analysis, Mr. Goh pointed out two conditions that would signify a bear market has taken form: a 20-percent market correction and a slowdown in the economy.