I added another $2,000 into my portfolio. One thousand set aside for DBS Enhanced Income Fund, and another $1,000 into Korea. Actually, I am not just bullish on Korea, I am bullish on Asia as a whole. The March triple disasters that happened to Japan was, in hindsight, exactly the trigger that was needed for markets to go into a full rebound phase.
Before this, we had tensions in the Middle East as an ongoing news, people wondering whether the economic recovery in the US was sustainable or not, whether China would continue to tighten and how that would affect Asia. There was some outflow of monies back to US. In short, the overall sentiment was just cautious with no clear direction.
In the aftermath of Japan’s earthquake, things actually look clearer. Why do I say that? Markets took a hit, and people had reason to be very fearful. And the cause was something you could see and track closely on the TV, with images of the devastation in Japan, and the nuclear power plant plastered across all major news channels. While scary in those few days, the worries have subsided, and markets have since rebounded and can now go into a full upward phase.
My reasoning is this: things don’t look so scary anymore. People are going to start saying “Hey, that was a 9.0 earthquake, followed by a big tsunami, and then nuclear power plant meltdown! If markets survived all that, what else could be even scarier?”
Furthermore, people looking at markets are going to start noticing, “Markets are now going up…is the worst is over? Check the earnings - earnings good? Companies doing well?” And they will find markets backed up by strong corporate earnings. The overall earnings of many markets are all up with some at record levels. Once this thought process sets in, and sense that the worst is over materialises, people will start looking beyond the disasters, and we will see a big rebound in stock markets.
Based on the strong earnings growth trends, markets should be much higher. Markets are cheap at this point in time, and global events, many of which have not substantially affected most of these corporate earnings at all, have largely kept investors cautious, at the sidelines, and downright bearish.
But we have now had a recent selloff - the Japan market crashed 17% within 2 days. Just as markets have a tendency to overcorrect on the downside, they also have the tendency to surge on the upside. I am confident that once we go into a full market rebound, the rise will be significant - not just 5% or 10%, it should be higher.
Markets like Korea, Taiwan, and China, which by right should have actually benefited as demand shifts away from Japan due to reduced production capabilities, actually sold off as well when the fear was at its peak. Now, we will see these markets come back with a vengeance. Look at Korea. Samsung markets everything from chips to electronics and is one of the biggest competitors to Japan’s chip makers and electronic manufacturers. If factories are stopped temporarily in Japan, and supply chain issues affect Japan manufacturers, Korean manufacturers like Samsung will be more than happy to step in and fill up the gap. Last I heard, there was absolutely nothing wrong with Korea’s factories, and they certainly aren’t stopping their production. If there is a gap, and they are asked to step up production, I am sure that they will be most able and willing to do so! So, if Toyota postpones its latest car release in the US because of the quake, then who gains? Hyundai gains because they are going to continue to go full steam ahead in selling their cars.
The only thing stopping me from putting even more money into markets now is because I am still on schedule to move house towards the end of the year, so the saving up for the move and renovation must continue. So, another $1,000 goes into the DBS Enhanced Income Fund and $1,000 also goes into the Lionglobal Korea Fund.
The LionGlobal Japan Growth fund which I bought $2,000 of last Tuesday at $0.532 is now trading at $0.593, or 11.5% higher. So, it was an opportunity buy which has done well. In hindsight, I wished I had placed even more, but let’s not get too greedy. I think the immediate short term profit to be made from the Japan equity market is now past because the Nikkei 225 index has largely recovered a lot of the big losses it suffered on the 14 and 15 March. However, markets like Taiwan and Korea which really should not have fallen, should now pick up pace as Asian markets overall all rebound. I believe the outflows from Asia back into the US is largely over, and so, I am very happy with the way my portfolio is positioned right now. I think things are going to look decidedly more bullish in the second half of the year as compared to now, and a lot of markets, including those in Asia, remain poised to surprise investors with their strength in this year.
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