The World Cup and Markets (11 June 2010)

A lot of people will be losing sleep watching world cup matches these two weeks. Would it have any impact on stock markets. Overall, I believe volume will be lower. More retail investors might be staying on the sidelines as they devote more energy watching the matches. However, the institutional players and people’s job is to look at markets every day will still be around. What that means though is that if some unexpected news were to surface, we could see greater market movements because the actions of fewer investors will be needed to skew the market in either direction.

Overall though, I don’t expect the world cup to cause markets to fall. There is no fundamental reason why it should. Lower volume does not necessarily mean a falling market. In fact, some large gains in markets happen when volume is low, especially after a drop. In the US, Americans are not really into soccer much, so there would be very minimal impact. It is in soccer mad Europe where we are likely to see the quietest markets, especially since the time zone is similar. In Asia, where the timing of the matches means that most people would be watching the matches at night plus there are few Asian teams represented, it shouldn’t have as much impact either.

One of the biggest contributors to market volatility, the Greek crisis and Euro’s fall has now stabalised. So, on that note, barring any unforeseen bad news, I believe markets will continue to stabalise in the coming weeks. People will be watching upcoming economic data rather closely. If there is reassurance that the turmoil in currency markets and Europe has not affected the global recovery taking place, then we can expect to see a rebound in markets in the weeks ahead.

Sovereign risk remains high though. Right now, any country that seems weak financially can expect no mercy from rating agencies, and currency markets. Case in point, the focus on Hungary, nevermind the fact that it is not even part of the Euro currency. I will be switching my holdings in my emerging market bond fund to an Asian high yield bond fund. There isn’t a lot of choices in the Asian high yield bond fund space yet. Currently, it is just the Fidelity Asian High Yield Bond Fund. That’s fine though, because the fund is a good one. I believe that corporate risk is actually lower than sovereign risk at this point, yet one can get more higher yields from being in an Asian High Yield Bond Fund as compared to being in a “safer” global bond fund.

I will also be monitoring markets for bargains. The current market levels are attractive for accumulation. Asia continues to recover strongly. A lot of the concerns right now are at most minor road blocks for Asia. If we continue at the current trend, economic power will continue to shift from the West to the East. I really like Singapore and South Korea markets right now. Singapore is an odd situation. We are looking at GDP growth of as high as 9%, maybe even higher this year. But looking at markets, you would have though we were in recession. In the end, fundamentals will matter more, so I am looking to continue to accumulate more while markets are cheap as I believe that markets will soon resume their uptrend after stabilising these few weeks.

Markets are Stabilising (4 June 2010)

Asian markets look to be stabilising now. I believe most of the fear and panic over the Euro has been priced in by now, and nobody really believes North and South Korea will go to war regardless of how antagonistic the two sides might sound. (If they were fighting you would have thought they have started by now already rather than just trading harsh language).

The key issue which has plagued markets in recent weeks, the falling Euro and the huge debt problems facing Greece, and other countries appears to be ebbing. While it is by no means resolved (it will take some time to clear up their debts), there are enough actions taken by the European governments such that the markets have been reassured. So, while we are not exactly seeing any big rebound in the Euro, it is at least no longer in freefall.

The meltdown in Europe markets and the earlier fall of the Euro did do one thing, it scared the governments in the EC so much that they rallied together to come up with a huge package and more. Because individually, the bond markets were punishing the weaker EC countries as well by driving up the interest rates they needed for further financing of their bonds, many countries other than Greece all got very nervous and a wave of measures were taken by EC governments to cut costs, rein in spending. Basically, everyone was afraid to be the next Greece, and so, fell over themselves to show that their governments were taking active measures to cut down their debt.

All this while, economic data from US and Asia continues to be encouraging. In the US, the ISM’s nonmanufacturing purchasing manager’s index continued to stay above 50 (at 54.4) in May, which continued to signal expansion and growth. Singapore‘s manufacturing also expanded in May for the 13th straight month. One of its components - new export orders index hit a high of 55.4. Another reason why I believe markets are stabilising now is that the sell off has made stocks cheap again. Asia ex Japan markets as a whole are now at valuations of 12.7 times PE ratio for 2010 and 11 times PE ratio for 2011.

Asian companies are mostly reporting positive and growing earnings, while trading at below 15 times valuations in a generally improving economic backdrop. So, while the recent volatility focused investors attention on the negatives, and drove markets down, you can’t ignore fundamentals forever. Asia is taking the lead coming out of this last recession and since Asia is not saddled down by the debt problems which plague a fair number of developed countries, this lead will widen in the coming years. This shift of economic power towards Asia is going to continue, and it will be one of the main reasons why I continue to be bullish Asia for the long term.

As such, I am not afraid to buy more when the markets go through a correction. To be honest, I didn’t much want to look at how my holdings have dropped last week, but I still went in because psychologically, the more unpleasant markets may seem, then that means the cheaper they are, and hence the more opportunities. Take Technology. While Apple is selling so many Ipads that it is delaying some of its global launches because it won’t be able to keep up, yet Technology stocks got sold down along with everything else as well in recent weeks.

So, while you might feel lousy about looking at your investments now, remember that the best buys are made after a selloff when everything is cheap rather than at the height of a bull market when everyone is making tons of money. We have just had such a selloff, and markets have now started to stabalise. so it is now a great time to start looking for bargains!

Shifted more into equities, added $3,000 into portfolio (25 May 2010)

I just switched out my holdings in Fidelity Europe High Yield Bond Fund into Aberdeen Pacific Equity, and added another $3,000 to my portfolio. And all $3,000 went into Aberdeen Asian Smaller Caps Fund. So, essentially, I am heavily overweight into equities at this point. Actually, I didn’t even want to look at my holdings, because I knew that with how markets have been falling since last week, it wouldn’t be a pretty sight.

However, it is also at such times, when I put in more money into equity funds. I still have about 10% in two bond funds (a US high yield bond funds and an emerging market bond fund), but I am at this point in time 90% into equities.

The current European woes with Greece debt and the Euro taking a pounding seems to drag on and on. Unfortunately, there isn’t any fast resolution to that messy situation in the EC. It will just need time to be sorted out. Time and a lot of political will because they will have to make sure Greece goes through with the tough measures (bitter medicine) required to get itself out of its current bankrupt state. (And let’s be honest, if the EC didn’t come in to help out Greece, it would have had to go bankrupt just like Iceland). Another area where political will is needed, would be when taxpayers in the other countries like Germany are presented the bill required to bail out Greece. They are not going to like it.

This brings me to my next topic. I think high yield bond funds are safer than general bond funds which hold sovereign debt at this point. It’s a rather controversial opinion because generally, high yield bonds are rated as higher risk than sovereign debt from G7 countries and developed countries which are the bonds which many global bond funds like to hold. But at this point, the whole EU is coming under strain due to the fall in the Euro, and the run on the Euro is revealing the weaknesses in the EU bloc. There are countries there, which without the Euro, and the EU, would have been downgraded to junk status without hesitation from rating agencies. The only reason they are still credit worthy is because they have the backing of the entire EU bloc. This makes the entire EU bloc risky though, because they are helping to soldier the risk of these financially weaker countries onto themselves. As a result, the Euro is falling.

At this point in time, Asian high yield bonds and US high yield bonds look more attractive because there is much less currency risk. US, as the base currency, is always where the money flows to when investors are spooked. So, as Euro falls, the US dollar can only strengthen. Asia, with minimal exposure to Europe, and growing fast, will continue to see inflows. The west are even clamering for China to let the renminbi appreciate, so Asia’s currency will stay strong.

Another reason is that I feel that the potential default risk in Asia and US high yield bonds is actually lower and less destructive than the default risk in sovereign country debt. High yield bond fund managers look very closely at companies before deciding whether to take up their debt issues. And with the generally recovering economic environment, most companies are well able to service their debts, roll them over, and obtain new debt. Even if there are a few company defaults, given the huge number of issues that a high yield bond fund will hold, the impact will be minimal.

Sovereign debt is more complicated in a way. There are the main G7 bonds which tend to make up a relatively large part of any indicative index. And there are a limited number of countries whose sovereign debt have a very credit high rating. Countries with a low rating tend to fall into the emerging market category like Latin America, Eastern Europe and some Asian countries. Yet, the developed countries’ sovereign debt ratings I feel at this point is looking risky. Many developed countries have issued huge amounts of debt in order to finance their huge stimulus packages in the aftermath of the US financial crisis. So, their finances aren’t anything to shout about. At the same time, it is arguably far far harder for a country to rein in itself if it has overspent (like Greece) as compared to a company. A company is free to fire staff, cut costs, etc, but political fallout from the citizens if a country tries to increase taxes and cut civil service staff or pay will be tremendous.

Thus, I feel that high yield bonds, corporate bonds for the most are looking far more attractive than sovereign debt at this point. It is easy to avoid Europe currency exposure if you wish to. Just stick to region specific type bond funds like US high yield, or Asia bond fund, or Asian high yield bond fund. Unlike the stock market, or the bond market, currency is a two way street. The Euro can’t just drop by itself, it has to drop vis a vis the USD or vis a vis some Asian currency.

There will come a time when it would be interesting to go into Europe markets and look for bargains. But at this point, I would err on the side of caution. So, yes, while I think markets have corrected enough for me to increase my exposure into equities, I am sticking to Asian equities for now. Asian small caps will look more and more interesting as time goes by as well. This is because many of these small cap stocks tend not to have any European exposure, unlike some of the larger blue chips which might have a global presence. I am confident that Asia will continue to grow, and while the markets are ducking for cover right now. Eventually, as the dust settles in Europe, confidence will return to Asia as investors see that Asia continues to grow despite what is happening in Europe. And as confidence returns, we will see a rapid rebound in Asian markets. Hence why I am shifting some of my bonds into equities, and topping up another $3000 more into equities as well.

We have to be patient at times when it comes to investing. Focusing on the current fear in the market will inevitably cause one to panic. I believe things will look vey different within 6 months to a year’s time so I am not focusing too much on the current negativity in markets.

The Euro is not out of the woods, topped up 2k more (18 May 2010)

It might look rather odd. I am not feeling very positive about the Euro, to be frank, but I just topped up another $2,000 into my portfolio. The main reason has to do with this so-called contagion effect and the fallout. Do I think that Europe is headed for more trouble, yes, unfortunately I do. But will Asia markets and high yield bonds come out of this well when the dust settles over there in Europe? Yes they would.

Firstly, let’s touch on Europe. Despite committing over 1 trillion US dollars to support the Euro, it is still coming under attack and has slid back to the levels before the 1 trillion dollar measures were announced. And it will continue to come under attack. The EC had two very stark choices before they announced the 1 billion dollar measures when the Euro came under pressure, would they stand together with Greece and the Euro, or would they go their separate ways, let the Euro fall apart and cut Greece loose. They choose the former, to stand together, and support Greece (and by default the Euro).

The problem with that, is that the market knows that such a choice is going to be a really tough road. And so, currency speculators, hedge funds will all continue to attack the Euro at every sign of weakness. Why is it so tough? Because while its easy to announce big measures, throw money at a problem, if the root of the problem is not solved, it will just get bigger and bigger.

Is it really so terrible for a country to go bankrupt? It’s not. Many countries have defaulted on their debts, had to go to the IMF for money, and forced to swallow bitter pills to turn themselves around. Some of the Asian countries had to go through this during the Asian financial crisis back in 1997/98. But while some had to go to the IMF, others didn’t, and since there wasn’t an “Asian Commission” to bail out any Asian country, whatever bitter pills that had to be taken, were taken. The more affected countries saw their currencies crash, but as a result it made their exports much cheaper, and the combination of the financial discipline plus their cheaper currencies caused most Asian countries to bounce back in a big way in the corresponding recovery. Most significantly, while the entire Asia was sold down, (even Singapore then), the bounce back was sharp and fast, particularly for countries which had strong reserves and whose currencies was never really in serious trouble (like the Singapore dollar).

But in Europe, we have over 20 countries of different backgrounds, politics and finances linked together by one single currency – the Euro. Its worked for the last ten years, but now the cracks are obvious. By refusing to cut Greece loose, and standing together, the EC has effectively made the Euro vulnerable to future attacks linked to any weakness in the weakest of their countries. If Greece shows any weakness in overcoming whatever tough financial measures it needs to take to address its huge debt, the Euro will come under attack as a result, and other countries like Portugal, Spain will all come under increasing scrutiny.

Trying to support a currency without addressing the underlying weakness has always been a futile problem. 1 trillion might be a lot of money, but hedge funds collectively could probably match that and more if they smelt blood (or weakness in this case). Even big countries like UK have learnt the hard way that if they try and prop up a currency against the rest of the market, you would probably need more money than you could cough up even if you are a central bank of a big rich country.

I sometimes wonder, if the EU had bitten the bullet, cut Greece loose from the Euro, what would have happened? There’s a difference between cutting a country from the Euro versus kicking it out of the EU. By cutting Greece loose, the EU would have shown that the Euro club is not for everyone, and even if you are part of the EU, if you don’t have the financial discipline to qualify, you are out. This would have immediately stopped the contagion then and there. The Euro would have been safe from further attacks because people knew that if countries didn’t make the cut, they would be kicked out. Greece could then be allowed to devalue their original currency and whether they manage to get their house in order sooner or later, at least the contagion would not spread.

Now unfortunately, by standing together, we have traded short term stability for long term weakness. The Euro is now only as strong as its weakest link. There will be a lot more pain going forward for the countries in the EU, and it remains to be seen if they have the political will to truly stand together. The bill has not truly been paid. When the richer member countries like Germany, France get the bill for what they have to come up with to save Greece, and the Euro, will their citizens balk? Honestly, I wouldn’t want to be holding EU country debt or much Euro now with all this uncertainty in the horizon.

So, why am I topping up more? Because even if I run through some of the worst case scenarios, I still arrive at the conclusion that Asia would come out of it alright, if not stronger. In particular ,if we are talking about currencies, its all relative. For the Euro to fall, it has to fall against something, be it the US dollar, the Yen, or other Asian currencies. Let’s not be afraid to look at extreme scenarios. Even if the Euro falls apart, would that immediately plunge Asia into a recession? It would not. There would be chaos in Europe as member countries have to go back to their original home currencies, but does it mean even Europe itself would fall into recession, much less Asia? The answer would be no.

Right now, there is weakness because the Euro is linking them all together. In an extreme scenario, if the Euro currency was dissolved, the EU would be seen as a grouping of countries each with their own strengths and weaknesses. The stronger member countries like France, Germany would not be placed in the same light as the likes of Greece in terms of financial strength. The initial chaos would be painful of course, but when the dust has settled, I do not see stronger countries like France, Germany weakening just because the Euro was dissolved. In fact, the Franc, the German mark would become more popular because they are seen as the stronger currencies in the region. Asia, itself would continue to export to Europe, and its currencies might actually rise against many European currencies. While some export markets might be affected, it would not be the entire region.

During the Asian financial crisis, while Asia countries were grappling with currency attacks, recession, the rest of the world continued to grow. The western countries hardly experienced much of a blip in their economies. I believe the same would happen even if the Euro could not be sustained and it fell apart. The Euro definitely does not have the status which the US dollar has. The world at this point can’t do without the USD, but it for sure can survive without the Euro, which didn’t even exist more than 10 years ago.

At this point though, I am glad I have switched out of financials, into Technology. There is too much ongoing potential problems at this stage and possible contagion effect to take a lot of risk with the financial sector, even though I do believe that Asian financials will come out alright. In contrast, the Tech sector will continue to see growth and recovery this year. The iphones, ipads, TVs flying off the shelves are proof of that.

I would also be more comfortable putting money into high yield bonds rather than a global bond fund which would likely have G7 and developed market bonds. But this blog entry has become longer than I originally though, so I will save my thoughts on why I actually think high yield bonds are safer than a global bond fund or developed country sovereign debt at this point in time for a future blog entry. Till next time.

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.

Switching Focus towards Tech and Small Caps (28 Apr 2010)

I made quite a few switches and two purchases today. These are summarized as follows:

1) Switched all holdings in DWS Noor Precious Metals to Henderson Global Technology (about $10,000 worth)
2) Switched all holdings in Fullerton Asian Financials to Henderson Global Technology (about $5,000 worth)
3) Switched all holdings in ING RF Emerging Markets to United Global Emerging Markets Portfolio (about $20,000 worth).
4) Purchased S$1,000 worth of Henderson Global Technology Fund
5) Purchased S$ 500 worth of Aberdeen Asian Smaller Caps Fund

So, what’s the rationale of the switches and purchases? Mainly, I am switching out of precious metals and financial services into technology. For precious metals, I believe the upswing for such commodities has been largely priced into the market. Preciously, there was the added fear that with the weakness in the USD and the global financial system, commodities was the one place to be and I held some of it as a hedge.

Increasingly, we are seeing signs that the whole world is clearly coming out of the financial crisis of Sep 08. (Its one and a half years already, its about time!). Markets are looking ahead and the story for commodities is no longer so compelling. Previously, I liked financials because they had been beaten down during the September 08 Lehman Brothers crisis. Indeed, the Fullerton Asian Financials fund earned me a 53% profit. However, I see some dampeners on financials going forward.

These include rising interest rates and growing regulation. The growing regulation presents especially a challenge. Many developed countries want to claw back money from financial institutions that they bailed out during the Sep 08 crisis. So, they are imposing additional taxes and such. To further protect investors, there is also a whole flood of regulation getting pushed through which would make selling financial products far more onerous and difficult. Finally, in Asia, which is going through a V shaped recovery, there is growing government intervention to cool down a rising property market. These measures will curb loan growth.

In contrast, the technology sector is looking better each day. The global recession previously hit tech companies as well. Now however, the recovery is filtering through to the consumers as well. There has been increased retail sales in US and in Asia. Singapore, one of the exporter countries of tech products saw its latest industrial production surge by 43% year on year last month (beating economist forecasts by a mile). The surge was due to strong resurgence in biomedical production as well as semiconductor chip production. Electronic shipments are accelerating as consumer confidence comes back.

Think of it from a from-the-ground point of view. The global economy is recovering. People are still worried, but getting increasingly confident. While they may not plunge into the huge spending ways of before the Sep 08 crisis that soon, spending will certainly increase from the belt tightening levels during the recession. And tech products will be a big sought after consumer item to spend that money on. After all, technology progresses very fast, so within one to two years, the next generation of tech products will be looking very appealing to consumers. You also have Apple coming out with Ipad, newer versions of Iphone. You have Avatar bringing greater awareness to 3D, increased demand for newer fancier TV screens. So, while people might not be confident enough to splurge on a brand new sports car, a tech product is certainly cheap enough for some self reward and indulgence! The tech sector has been the whipping boy amongst investors since the 2000 technology bubble crash for too long. After ten long years, it would certainly be time for investors to relook this sector with fresh eyes. I think Technology is on the verge of a new resurgence. Hence, my shifts into Technology within my portfolio.

Another area I like is small caps. I already have a fair amount in Aberdeen Asian small caps, so just added a bit more to the fund. I think that in a resurgence of the global economy, at first, it’s the blue chips that will get the most attention. But increasingly, a lot of the recovery will be priced into the clue chips and the best bargains will no longer be in those, but instead in the small caps. As always, be diversified, but I am seriously thinking of shifting more weightage towards small caps as more and more of the good news gets priced into the blue chips. As risk appetite increases with the fading of memories of the last big crash of 2008, we will see more and more funds flow into small caps.

While Asia Charges Ahead, Don’t Let Euphoria Set In (16 Apr 2010)

First, the trade ministry announced that Singapore GDP surged 13.1% year on year in the 1st quarter 2010. On a quarter on quarter basis, the surge in GDP was an eye popping 32.1%, the highest ever growth on record, and higher than any economist had dreamed of forecasting. On the back of this, the monetary authority of Singapore (MAS) also announced that it was recentering SGD’s trading band as well as signaling a policy towards gradual appreciation. This is an unprecedented move in terms of tightening monetary policy as MAS has never done both at the same time before. It also represents a very significant shift in policy. MAS is essentially saying that with the surging economy, the worst is not just over for Singapore, in fact, the Singapore economy is now booming so much that they need to rein in potential inflation, so they are taking action immediately.

Remember when back in July 2009 (last year) when Singapore was the first to announce that its economy was coming out of recession, and this was soon followed by other Asian economies in the region. Singapore is one major trading hub in Asia, and closely tied in to the global economy. Its health and overall economic growth direction is an early indicator of how the rest of the export oriented Asian economies are faring. Singapore’s stunning 1st quarter GDP growth is a telling indicator that global trade is recovering, and along with that, Asia is now not just experiencing a “V” shaped recovery, it is now literally going into a boom period.

Hard numbers tell a bigger story that anything else. While Europe may still moan and worry about Greece and other potential debt ridden European countries, and US is still trying to slowly lower the jobless rate, Asia is now literally running on full steam ahead. Investors are beginning to recognize that emerging economies as a whole, and Asia in particular, is the locomotive pulling the entire world out of the 2008 recession. And Asia is now experiencing a red hot economy. Central banks in Asia should be more worried about inflation and asset bubbles than on double dip recessions. Property prices has surged in many parts of Asia including Singapore, Hong Kong, China, and Taiwan, and this is despite various moves by Asian governments to keep a lid on property speculation. The latest is that Singapore March home sales were up 47% month on month. Stock markets have also risen, though not as strongly as property.

The next two to three quarters will continue to see this trend being played out. While 1st quarter numbers are already eye popping, second quarter numbers will be good as well. Let’s not forget that while stock markets started to surge in 2nd quarter 2009, most of the economic indicators themselves did not show as much improvement at all. This led many to question the sustainability of the rally in the 2nd quarter market rally last year. This means that as we move into 2nd and third quarter this year, the numbers will continue to look very good, compared to the base last year, which is very low.

I am already fully invested, and I even shifted some money from bond funds into equity funds during the February correction. For now, I am sitting back and enjoying the ride up though I am monitoring the situation closely. The improving fundamentals of the economic recovery are now in the process of showing up in solid GDP numbers throughout the region and in companies earnings as well. Singapore is a precursor to the rest of Asia. The question should be whether markets move up beyond what the improved fundamentals justify on the strength of investors turning into a very bullish mode. We are not quite there yet, because the full improved numbers have not shown up in reported economic data or company earnings yet. Nor are we at the stage where everyone and their neighbor is shouting buy.

But as the market climbs higher, then such euphoria will be things that investors need to watch out for. The next two quarters should be glorious and very exciting for investors as they ride the market up. Many who bought in since last year or start of this year are now seeing their patience rewarded. While it is human nature to want to check on your holdings often to see them rising, don’t get drawn into making any emotionally driven decision. The coming few months are likely to be volatile even if on the uptrend, so investors need to be careful. As market sentiment gets more and more bullish, investors tend to get less careful. In actual fact, it should be the reverse. As the market surges ever higher, we should be more cautious instead. So, I will be monitoring the markets closely. At some point in the next few weeks, I may shift back some money which I shifted out of bond funds towards a more neutral stance if the market gets euphoric.