25 January 2014

Some thought after US market plunged by almost 2% in a day - 25 Jan 2014

The Dow Jones industrial average dropped back below the 16,000 mark, plunging 318.24 points, or 2%, to 15,879.11 last night. To me, it is something as what expected by majority investors as US. FED meeting is coming soon next week, and some investors would rather perform a profit taking when uncertainty of QE tapering arises.

In Malaysia market, we have seen a weak support level at 1,800 point, where this is a psychological support level for most investors. For Singapore market, now its in 3,000 - 3,100 range, which I think 3,000 maybe a better support level for now.

We should not forget that last year performance for US and Malaysia was tremendous, as S&P Index, Dow Jones Industrial and KLCI reached record high while Singapore was affected by labor tightening policy as well as property cooling measurement. Once the de-leveraging process has started, we could start to feel the pain of it in short term.

As hot money would flow back to US market due to US$ strengthening (expected increased interest rate), emerging market could seen a slow down of FDI compared to few years ago as those "smart monies" try to leverage on low interest rate to gain access to high growing region. Now, we have seen that currencies in SEA region depreciating against US$. RM was recorded as low as RM3.34 to US$1.00 few days back and this trend could continue if Bank Negara do not take in any action to prevent it.

In Singapore, the number of residential property deals (both private and HDB) have dropped significantly in latest quarter report, supporting the fact the cooling measurement taken by the government is taking its effect now. What made it worse is that, number of new launches was in the slowest pace since few years back, suggesting that property developers also try to avoid the slow down of the sales while focusing on certain niche market, such as retirement property with about 60 years lease period compared to normal 99 years lease period. Capitaland is now at the range of S$2.80 and we may see a drop again if market sentiment getting worse later.

As we could see more companies to report their latest quarter report or 2013 full year performance soon within a month (majority of companies report their FY2013 report next month), so we may see that the stronger financial performance companies may perform better than its peers in long run. I'm personally think that Singapore STI may not able to achieve record high this year, given the macro environment, but we would still able to find some hidden gems and hopefully could perform better than STI index by employing cautiously optimistic strategy.

Be patience and wait for more buying opportunity to come, and for those investors who bought at higher level, do not be panic and try to re-adjust your strategy by not putting short term money in the market as I think it maybe a tougher year compared to 2 years back.

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