Added $1500 in the Current Market Correction (4 May 2010)

I did some switching into the Henderson Global Technology fund last week. With the correction we are seeing this week, I added in another 1500 to my portfolio. The funds added into were as follows:

$750 – Aberdeen Singapore Equity
$750 – Henderson Global Technology

The current weakness in Asian markets stems from Goldman Sachs and China. Goldman Sachs is facing criminal charges and the intense spotlight on the firm, and fears that it may open the way to implicating other financial industries has western markets worried. Here in Asia, a bigger worry is how China is stepping up its efforts to combat rising inflation and asset bubbles. China just ordered the increase in bank’s reserve ratio. This is just the latest in a whole host of new policies meant to limit a rising property market. More can be expected to follow. As a result, the China markets, including the property sector has recently corrected downwards.

However, despite China’s efforts, there remain many concerns on whether they will be able to successfully cool down the stock markets and the property market, without causing the China economy to slow substantially. As China’s red hot economy has been instrumental in leading Asia out of the current recession, many are understandably nervous.

However, despite these concerns, I still think Asian stock markets at this point are fairly cheap. We are not even back to the 2007 highs in most cases, and even then we were not at a bubble. The shift in economic power continues to happen as Asia charges ahead in a V shaped recovery as opposed to the much weaker recovery being seen by developed regions like Europe or US.

But I already have an heavy overweight position in Asia. For me, Technology remains the most interesting at this stage. I think the Technology bubble bursting in 2000 has a big psychological impact on many investors, many of hope have sworn off the Tech sector permanently. But I believe it is more important to look forward than to look back.

Technology has undergone big changes in the last ten years. The sector is no longer filled with startups with no business model, and just some vague internet strategy. The Technology crash has weeded all those out. The remaining Technology companies are now all strong leaders within their own fields and many are cash rich. At the same time, coming out of recession, many consumers will be looking to buy more Tech products, and not just consumers, companies as well. This is because many companies let their IT spending slow during the recession to save costs, and they will now have to gradually upgrade their systems.

Technology also doesn’t face the kind of scrutiny that other sectors are facing at the moment. They aren’t being hauled up to face criminal probes like Goldman Saches, nor are governments thinking of levying any special taxes on the sector (unlike how Australia is now talking about levying a special super tax on resource companies). I think Technology will be the dark horse sector over the next 12 months, and could outperform most of the other sectors including those getting the most interest now (property, financials and resources).

My other purchase (more like a top up) was into Singapore. This has a more home base bias, but ultimately, I have no worries on Singapore. The economy is expected to grow close to 9% this year (substantial rise in economist forecasts we are seeing!). And many of the blue chip companies are well capitalized, cash rich, and will be beneficiaries as the Singapore economy charges ahead this year. The two IRs which are now completed are icing on the cake, but don’t estimate their contribution. Already tourism arrivals are substantially higher. Singapore is forging ahead as a financial hub, and as a fun, happening place for tourists to come and visit. Based on all these and with valuations at this point still at a relatively fair 14.7X for the year 2010, Singapore remains attractive.