Technically, US equities have peaked out and are losing steam in the short-term. In the last issue of Shares Investment, my perception towards the US market has turned negative as I foresee tremendous selling pressure. With the US market leading the decline, global equities including Hong Kong and Singapore also followed to drift lower.
On 26 September 2018, US Federal Reserve hiked federal fund rate again by another 25 basis points to 2.25 percent. As the news was largely within expectation, investors’ initial response to the hike was largely muted. However, into the month of October, US investors grew increasingly worried about a more aggressive pace of interest rate hike. On 3 October 2018, after peaking at a record level of 26,952 points, the Dow Jones Industrial Average turned south by 124 points. On the following day of 4 October 2018, the Dow again shed 201 points. In a matter of two days, the Dow corrected 325 points.
On 24 September 2018, US President Trump and his South Korean counterpart Moon Jae-in signed a revised version of the US-Korea Free Trade Agreement. This was another breakthrough for Trump, following a revised bilateral agreement with Mexico. Following which on 1 October 2018, the US finally reached a pact with Canada to achieve a significantly revised North American trade deal. The trilateral agreement will be renamed the US-Mexico-Canada Agreement (USMCA) which will replace the North Atlantic Free Trade Agreement (NAFTA).
On 11 May 2018, Tun Dr Mahathir led the opposition coalition Pakatan Harapan to topple Malaysia’s previous ruling party Barisan Nasional (BN). At the age of 93, Mahathir who was previously Malaysia’s former Prime Minister for 22 years, was once again re-elected to become the oldest PM in the world.
Over the past fortnight, the opening premier of “Crazy Rich Asians”, an American drama-comedy with Singapore as the backdrop, dominated the US box office. It is the first-of-its-kind film in Hollywood to feature an all Asian cast. In the past, Asian actors in Hollywood were normally casted as kungfu masters like Bruce Lee and Jackie Chan or underground triad bosses. Crazy Rich Asians is a “Cinderella” story with a modern twist. The male lead portrays third-gen Singaporean bachelor from a wealthy real estate developer’s family, while the female lead is a Chinese American professor whose wealth pales in comparison.
On 19 August 2018 at the annual National Day Rally speech, Prime Minister Lee introduced the “Merdeka Generation Package” to help relieve medical expenses for those born in the 1950s. In addition, PM Lee also addressed the issue regarding the HDB’s 99-year lease policy and expanded the Housing Board’s Home Improvement Programme to cover newer blocks. The new schemes indicate that the government will likely increase its expenditure – a move that is largely positive for the economy.
US President Donald Trump claimed that the US is winning its trade war against China, comparing the 27 percent fall in China’s stock market against US equities that are still holding up well. Healthy performance in the US stock market has helped to alleviate sentiments for local investors as the Straits Times Index finally managed to stage a rally in July after two months of decline. However, driving both the US and Singapore stock markets are in fact strong corporate earnings.
Hong Kong-listed Wheelock and Company recently made an offer of $2.10 per share to take its Singapore subsidiary Wheelock Properties (Singapore) private. The offer represented a 20-percent premium to the closing price of $1.74 on 20 July. Not surprisingly, the privatisation offer amidst current negative sentiments came in below the fair value on the street. Nonetheless, the move also signaled the depressed valuations for the local property sector, prompting investors to relook at other property stocks again.
In the past two months, both Singapore and Malaysian equities performed rather poorly as Trump’s trade war and the change in Malaysia’s leadership were among the reasons impacting the stock markets adversely. On 9 May 2018, the political coalition Pakatan Harapan – led by former Malaysian Prime Minister Mahathir Mohamad – brought down the ruling Barisan Nasionals in the 14th General Election. Mahathir, 92 at the point in time, was re-elected Prime Minister once again.
The US Commerce Department finally lifted the sales ban on ZTE Corp (763.HK), allowing it to resume operations. Shares of ZTE rebounded 25 percent on 12 July 2018.