Saturday, December 21, 2013

Dr ChanYanChong-Commentary 20.12.2013 -2013 Comes To An End, What Is Up Next For 2014?

20 DECEMBER 2013
2013 Comes To An End, What Is Up Next For 2014?
By Dr Chan Yan Chong

Singapore experienced her first riot in 44 years on 8 December evening this year. Singaporeans below 40 years of age would never have seen riots, demonstrations nor strikes on their home soil before until lately, when we saw bus drivers on strike and migrant workers going on a rampage. On 9 December, the Singapore stock market closed flat, with almost no changes in the Straits Times Index (STI); even when the STI fell 0.87 percent on 10 December, it was not considered a significant fall. I believe investors’ concerns were not so much about the destructions wrecked by the riot, but whether the Singapore Government will change its foreign labour policy because of the unrest. After all, the strike that happened earlier this year involved bus drivers from China, and the recent riot involved foreign workers from South Asia, primarily India.

Today, Singapore’s population stands at 5.4 million, but Singapore citizens account for only 3.3 million, plus around 500,000 permanent residents. In other words, Singapore has a foreign labour workforce of more than 1.5 million, of which, a considerable portion are cheap foreign workers. This massive army of cheap foreign labour helped to create wealth for Singapore and keep the building costs of Housing Development Board flats low. If the Government changes its labour policy as a result of the unrest, it would bring about a fundamental change to the Singapore economy.

As the year winds down, many financial professionals are beginning to predict how the stock and property markets would move next year. Interestingly, many are bullish about the stock market next year, while an equally sizeable number of them are bearish about the property market. However, after all these years, I have never seen a year in which the stock market soared while the property market plunged! Why, then, would predictions for next year’s property and stock markets be so polarised?

In recent years, Hong Kong has seen a similar surge in property prices as in Singapore and has also seen the introduction of various measures to put a check on the property market. However, construction projects usually take a few years to complete after all. The Singapore Government has begun to worry that, if the wave of property development continues unabated next year, would property prices crash when these projects are completed eventually?

I do not want to predict the future and always take life one step at a time by concentrating on making only one decision – whether it is time to buy, sell, or stay on the sideline. I do not have the ability to predict what will happen next year, as the future is affected by more than just a single factor; those factors will affect the future of the stock market and the property market would be affected, in turn, by a myriad of interlocking unknown factors. We do not know when the US Federal Reserve will exit the market, nor when it will raise interest rates. The only things that are clear and are actual realities are the Government’s measures to control the property market, as well as the 60 sections of “The Decisions” after the Third Plenary Session of the Communist Party of China (CPC). The effects of US tapering and interest rate hikes on the local stock and property markets will far outweigh the outcome of the Third Plenum of the CPC and current curbs in the property market.

Unfortunately, I do not have the ability to cast accurate predictions of the US tapering or interest hikes, so I think now is not the time for any major decisions. Property investment involves a large amount of money, so my advice is to take a wait-and-see approach for now. Everyone will need to decide for themselves how deeply they want to invest in stocks. Over the past year, I have not sold a single stock; I did buy what I consider an appropriate amount of investment-worthy shares. When you buy selectively, you would obviously have some good buys as well as some lemons. But it does not matter, for even if you bought the wrong shares, your dividends received would still be more attractive than the interests offered by banks.

A while ago, the US stock market went into retreat out of worries over the possibilities of the US Federal Reserve tapering. Every time the US Federal Reserve met, the market would hype up tapering concerns and the stock market would go into correction accordingly. On a positive note, this would help dampen the chance of a sudden surge in the US stock market that could result in a burst bubble. It is better to allow the US stock market to go through a round of bull-run, followed by a period of cooling before taking on the next peak. This would be much more preferable to a rocketing market. Despite the bull-run in the US stock market, Singapore and Hong Kong are not following suit, as both markets are hampered by underperforming China A-shares. After this round of sudden upswing, the US stock bubble will burst even sooner, which would drag down the Singapore and Hong Kong stock markets. Thus, the best way to delay the US stock bubble from bursting is to dampen its stock market’s rally.

Earlier this month, Wall Street suddenly rebounded sharply on 6 December after five consecutive trading days of decline, which saw the Dow Jones Industrial Average returning above the 16,000 level. Interestingly, the market attributed this period of correction to worries over an early exit from the market by the US Federal Reserve. However, the same market bafflingly explained that the 6 December rally in the US stock market was a positive reaction to the good performance of the US economy. If the economy is doing well, that would raise the likelihood of the US Federal Reserve tapering, so why is the stock market rising? Apparently, the various explanations for these five days of correction and the subsequent rebound of the US stock market are just after-the-fact justifications and we should not take them seriously. The reason why professional stock market analysts have to put forward some reasons to explain away daily changes in the stock market is, in fact, due to pressure from the media.

I have always emphasised that it is impossible to be cognisant about short-term trends of the stock market. We cannot extrapolate long-term trends from the market swings, nor can we explain why it is moving so. What is more important is predicting future trends. Looking to the future from where we are now, I am optimistic. As Wall Street continues to hit record highs, many people are worried that it has already peaked and has formed a bubble. I think that the bubble will not be bursting anytime soon. We are now at the initial stage of bubble formation. The Third Plenum of the CPC has also injected a strong and positive impetus into the market. As the decisions from the Third Plenum are being implemented in stages, that would provide the stock market with wave after waves of momentum. As long as you remember not to be greedy and avoid putting too much money into those third-or fourth-tier stocks that are good only for speculating but has no real fundamental value.

Publish date: 20/12/13

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Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)

乔治·索罗斯(George Soros)



高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo

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