Asian markets went into some profit taking this week, but that is exactly the kind of short term pull back I was waiting for to put in my monthly investments. So, I took the opportunity to add in $2,000 into my portfolio yesterday. These were all placed into Aberdeen Asia Smaller Caps.
I continue to think there is more upside potential in Asia, but the surge recently also means that some markets are more attractive while other markets are now closer to fair valuation. South Korea, and Asia small caps remain very attractive to me. Especially on a valuation basis, these look cheap. On the other hand, Thailand, which has run up so much this year, is starting to look fairly valued, and if the run continues, will start to look expensive.
Singapore equities is a weird case. I have great confidence in our country’s ability to grow, and our diversifying of our economy has made the case even stronger. Certain economies like South Korea and Taiwan are still overly reliant on manufacturing and electronics. They are dependant on the Tech cycle going in their favour. (Fortunately for them, I think Tech will continue to do well over the next two years). But China is catching up really fast, and China is going to move into every single sector it can, so the competition from China will only get more fierce. Singapore though, has diversified well. We are now into biomedical, and with the two Integrated Resorts, we are now even slated to have a gaming industry that will rival Las Vegas within two years. Not bad considering we just started it this year.
But having mentioned all that, the Singapore market earnings growth, at is actually lower compared to many other Asian countries, and our valuations are higher as well. So, while the growth remains there, and I am confident it can continue, Singapore is not as good a bargain as other Asian countries. Other countries also have more upside compared to Singapore. Singapore’s forecast earnings growth for 2010 and 2011 is 9.8% and 9.7% respectively. This compared to just about every other country’s earnings growth which are in the double digits. Singapore’s forward PE for 2011 is now 14.2X. This is now no means expensive, but when compared to many of the other market’s valuations like South Korea, at 9.7X, Taiwan at 12.2X, and even Hong Kong at 12.9X, then you can see why our research has decided to downgrade Singapore slightly recently. Will it still reach 4000 points by 2012? Yes, I believe it will, but other Asian markets may do even better than that.
When I assess own portfolio, I note that my Aberdeen Singapore equity fund only forms 6.67% of my portfolio. This is of course in addition to the Singapore holdings that my other Asian equity funds will hold. Am I too heavily weighted in Singapore? I don’t think so. Most Singaporeans have a fair amount of investments in Singapore. I believe its called Home Country bias. So, I won’t cut any of my Singapore equity fund holdings as of now, despite the nice profits it is currently making.
Remember in the earlier part of the year when I called for patience as markets went sideways? The market often moves sideways for a while, even correcting a little before moving up again, even when it is on a general uptrend. When we see the market doing this, we either pick up some bargains while it dips, or be patient and wait. 2 years is not such a long time. I believe that as early as next year, we will see a lot of the current concerns clear, and the overall outlook get much brighter. Of course by then, markets are gong to be higher too. So, I will pick up bargains every now and then while I can.
I am still trying to save up for some big expenses like renovation, a car, next year too. Hard to do that when I am tempted to put as much as I can into equity funds right now. In any case, next week (1st week of November), I am taking a vacation with my wife in Bali. All work and no play is ultimately not healthy. So, I am taking a much needed break. We are even leaving the kids at home! So, until the week after, signing off for now!
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