The STI index looks likely to finish today at over 3,200 points. Given that the Singapore market ended last year at 2,897 points, we are now 10% higher than what we started the year with and we are not quite at the end of the year yet. These last two and a half months before the year ends might actually see the Singapore market, and Asian markets move even higher, so despite everything which has happened to derail markets this year, I am confident that we should see some decent gains from markets this year.
The earnings season in the US has just started, but when it is over, I do expect good news from most of the companies. Spending is starting to come back in the US, and if anything, the weak US dollar has made its exports look even more attractively priced. So, US based companies with a global business will be seeing higher earnings just from the conversion back to the USD even if their business and sales haven’t improved at all, and with Asia continuing to grow strongly, I would be surprised if that is the case.
Even back in the US, the high unemployment rate means that companies in the US have been reluctant to hire, and why it has made the unemployment numbers look bad, and prompted the US central bank to consider further stimulus, what this means also is that the companies are keeping themselves very lean, and when sales improve, their earnings numbers will look very good indeed. This is why shockingly, when we look at overall earnings, we see that overall earnings will surpass 2007 record highs by next year. So, despite everyone worrying so much about the US economy, US corporations actually have a lot to smile about right now.
I believe the current strong earnings trend by many companies, including those in Asia, and the low valuations will see us enter the next bull run phase. It looks like it has already started already. October has been a very strong month so far. I suggest checking out your holdings if you haven’t in a long time. You might be surprised how much they have moved up. My 2 kids had their holdings shoot up strongly, and the same goes for mine own as well. My holdings were at $343,397 back in April this year, six month on, they are now currently at $419,587. According to our database, 62.4% out of all of the total number of Fundsupermart accounts are all in the black too, and I fully expect this percentage to rise over the next two years.
Just a bit on currency wars though. It has only been in the last 3 weeks that this term has now suddenly started to appear in the media all over the place. Basically, the western nations, especially the US, are firmly on a road towards weakening their currency, and they are not happy with nations like China because China, by keeping its Renminbi pegged within a trading band to the USD, is seen as profiting at the expense of the US. US firmly believes that the renminbi is undervalued by a significant amount and along with other western nations, are pressuring China to allow the Renminbi to appreciate. China’s resistance to this, and the failure of the recent IMF talks to get all the major nations to agree to a sort of “global” direction towards the currencies has led many to now worry that the major nations are now all about to engage in a “currency” war where each major nation will compete with each other to see who can devalue their currency faster than the other.
My view on all this? A lot of it is political posturing. Countries have little control over what other nations wish to do with their own currency. I am not even sure why US is quite so upset about given the fact that the USD has already been falling quite hard the last few weeks. So, their exports are already cheaper for most countries. Even against the renminbi, the USD has weakened, because it is no longer a hard peg, there is some room, within limits for the renminbi to trade.
I will write more on this in my coming blog entry. But my quick take on it is that there will be a few things that might happen as a result of concerns on currency wars. The USD will continue to fall, though I don’t expect a freefall. Commodities will continue to see their prices go up, because just about every major commodity including oil, and gold is all priced in USD. And equities will also see an uptrend from this as well. Because what a company produces will always have a value to it. So, a car produced by a car maker is always going to be worth something. So, regardless of how a country’s currency move, its companies will still retain their value over time. Google isn’t going to worth any less as a good company just because the USD weakens. So, buying into equities (companies) will be a good choice too when there is a lot of uncertainty over currencies. So, look out for more on currency wars and such in my next blog entry and have a good week!
No comments:
Post a Comment