Monday, May 03, 2004
My view is that the US market is heading towards an oversold level. The NASDAQ has violated the 200day MA, but I anticipate a rebound. This rebound is to be faded, that is, any rebound is a selling opportunity. The maximum rebound level should be capped at the 50day MA, which currently stands at 2002.24. The S&P is expected to consolidate, with support at 1090, followed by 1075. Any rebound in S&P is also a selling opportunity.
The Singapore market is also heading towards oversold, and cautious nibbling on dips may be a profitable strategy. Do not enter in a big way at this time as further downside risk looms in the medium term.
Fixed income should continue to fall in anticipation of higher rates. Higher rates and a slowdown of China is also bearish on commodities. Higher rates imply a stronger US dollar, which would be bearish on gold and silver. Folks should use any rallies to sell down their gold and silver holdings. I will most certainly do so.
All in all, I do not see much buy-side opportunities now except possibly being slightly bullish on the US dollar. If things play out to my expectation, we could have quite a huge US dollar rally, but things of course can turn around at the snap of a finger.
A client portfolio at this moment would be overweight cash and cash equivalents, as I see value in neither the stock nor bond market. As the saying goes, if all is trash, hold cash. Longer term, I would overweight Philippines, Taiwan, Indian, Japan, Malaysia, and investment grade fixed income (bonds) rated A and above that are denominated in Asian currencies, and I would underweight US, UK, China, Hong Kong, and junk bonds.
The Singapore market is also heading towards oversold, and cautious nibbling on dips may be a profitable strategy. Do not enter in a big way at this time as further downside risk looms in the medium term.
Fixed income should continue to fall in anticipation of higher rates. Higher rates and a slowdown of China is also bearish on commodities. Higher rates imply a stronger US dollar, which would be bearish on gold and silver. Folks should use any rallies to sell down their gold and silver holdings. I will most certainly do so.
All in all, I do not see much buy-side opportunities now except possibly being slightly bullish on the US dollar. If things play out to my expectation, we could have quite a huge US dollar rally, but things of course can turn around at the snap of a finger.
A client portfolio at this moment would be overweight cash and cash equivalents, as I see value in neither the stock nor bond market. As the saying goes, if all is trash, hold cash. Longer term, I would overweight Philippines, Taiwan, Indian, Japan, Malaysia, and investment grade fixed income (bonds) rated A and above that are denominated in Asian currencies, and I would underweight US, UK, China, Hong Kong, and junk bonds.
Sunday, May 02, 2004
Just to offer my two cents worth on the subject of diversified portfolios.
A diversified portfolio is said to minimize unsystematic risk, in accordance with modern portfolio theory. However many financial advisers think that global or regional equity funds offer diversification. Such is NOT the case.
A global equity fund is invariably VERY overweight the US, simply because the fund mandate will require outperforming indices such as the MSCI World index, which happens to be very overweight US.
Similarly, an Asian regional fund would invariably be very overweight China and HK, simply because the respective MSCI index (for Asia ex Japan) is itself overweight those two countries.
Hence my assertion that global and regional funds do not offer adequate diversification. Clients are exposed to unsystematic risk.
My recommendation is that for equity portfolios of S$100,000 and above, an assortment of single country funds should be purchased, in accordance with the adviser's viewpoint, rather than global or regional funds whose mandates are chained to an unfair index.
A diversified portfolio is said to minimize unsystematic risk, in accordance with modern portfolio theory. However many financial advisers think that global or regional equity funds offer diversification. Such is NOT the case.
A global equity fund is invariably VERY overweight the US, simply because the fund mandate will require outperforming indices such as the MSCI World index, which happens to be very overweight US.
Similarly, an Asian regional fund would invariably be very overweight China and HK, simply because the respective MSCI index (for Asia ex Japan) is itself overweight those two countries.
Hence my assertion that global and regional funds do not offer adequate diversification. Clients are exposed to unsystematic risk.
My recommendation is that for equity portfolios of S$100,000 and above, an assortment of single country funds should be purchased, in accordance with the adviser's viewpoint, rather than global or regional funds whose mandates are chained to an unfair index.
