Watch Emerging Market Rally

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I have been following closely on the Emerging Market for any investment opportunity. Just saw this useful article from Bloomberg and thus summarize some key points for my own record.

Why Political Turmoil Hasn’t Stopped the Emerging Market Rally

Summary

  • Growth gap, earnings, valuations back bullish equity outlook
  • Stocks rise even as political risks rise from Russia to Brazil

 

All the chaos was overshadowed by investing fundamentals, according to market participants who point to a surge in corporate earnings forecasts and economic growth that far outstrips expansion in developed countries. Economists predict that growth gap, which widened last year for the first time since at least 2010, will expand in the next three years, meaning a bigger middle class and greater opportunities for businesses. That makes it easy to overlook the political risks.

“Markets have become used to the political noise, especially after Brexit and the unexpected election in the U.S.,” said Simon Quijano-Evans, an emerging-market strategist at Legal & General Investments Management Ltd. in London. “The question is: When does all of this culminate into a huge balloon that eventually explodes? I don’t think we’re there yet.”

 

Earnings

Since January 2016, there has been a rebound in earnings estimates for companies based in developing nations. Analysts raised the profit outlook for the MSCI Emerging Markets Index by the most since September 2010 in the last quarter. Particularly notable was that some of the most politically turbulent nations — including Russia and Turkey — saw their forecasts rising to records.

Valuations

The increase in earnings estimates is keeping a lid on valuations, so much so that developing-nation stocks are becoming cheaper relative to their developed-nation peers even as they rally. The greater discount, coupled with higher growth and earnings potential, makes them irresistible to investors even amid all the political drama.

 

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Build a Diversified Investment Portfolio to Manage Risk

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Original post from https://mystocksinvesting.com

Completed a training “How to Build a Diversified Portfoliof for Retirement” at Natixis Global Asset Management last night. In the class, I have gone through the Personal Investment Risk Profile (Life Stage Adjusted) with the participants so that everyone know how they can do their asset allocation in their investment portfolio. I also shared how to reduce the portfolio volatility and max draw down by varying the asset allocation percentage, By varying the asset classes and asset allocation % can help us to navigate in different market condition and remove our emotion in the decision making.

 

Lastly I shared about the importance and the needs of Portfolio Re-balancing as this is a systematic and disciplined approach in managing our investment portfolio.  I also shared the stock market is cyclical in nature, so buy/close one eye/hold forever may not be a good strategy over the long run. The reason is any country, any sector, any regional cannot be the best performer year after years, and they have to come down after a while. Thus,  We have to re-balancing our portfolio at least once a year in order to optimise the returns.

 

 

Feel free to send me an email marubozu@mystocksinvesting.com if you want to understand more how to build a diversified investment portfolio to manage your investment risk,

 

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Stay Defensive, De-Risk Portfolio, Protecting the Down Side in Current Market Condition

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I invited my good friend and my soccer buddy for more than 20 years, Sani Hamid, to speak at a private event organized by Online Traders Club Singapore.

I shared about Sun Tzu in Investing while Sani talked about “Short vs Long Term Investing: Who Wins?“, how he convinced his mother in-law to invest in gold (lol) and how to build a portfolio to reduce market risk and business risk through asset allocation and diversification.

All participants were impressed by Sani Hamid’s knowledge in this great event.

 

 

Kenny Loh’s sharing on Sun Tzu in Investing

 

Sani Hamid’s Sharing his topic :Short Term vs Long Term Investing and how to use a Diversified Portfolio strategy to Stay Defensive, De-Risk Portfolio, Protecting the Down Side in Current Market Condition.

Current Market Risks

1.       The U.S. markets are clearly overbought and despite any correction, will continue into even more overbought territory if it moves higher from here. The only way to bring valuations back to historical norms of around 16-18x P/E is for a major decline to take place. And as we all know markets will tend to overshoot to the downside (in the same way they overshoot to the upside like now);

2.       The current market expansion is already into its 8th year and is the second longest after World War 2 – second only to the 1990 to 2000 rally. That rally came to an abrupt end thanks to the bursting of the Dot Com bubble. As it stands, we find it hard to justify further sustainable gains on the U.S. markets as we enter into a period where we will have the Federal Reserve tightening interest rates AND withdrawing liquidity at the same time (see NY Times  March 13, 2017 “The Fed’s Era of Easy Money Is Ending”);

3.       Further out, we expect the U.S. economy to sputter as the short-term hype over President Trump’s policies either wanes or prove to be difficult to be implemented. And even if these make it off the drawing board, the majority are counter intuitive and will lead to a less competitive, less efficient & slower economy.

Advice from Sani Hamid, Wealth Director, Wealth Management (Economy & Market Strategy), FINANCIAL ALLIANCE PTE LTD

What should investors do?

Any rally from here should be taken as a step closer to the top of the market cycle. In other words, U.S. markets today are neither at the bottom or middle of the cycle but in the last quadrant. This means a deteriorating risk/reward ratio – investors will be taking on more and more risk without being sufficiently rewarded.

As such investors should take a cautious and defensive approach when investing under such market conditions. The term “caught holding the baby” should be of a primary concern. De-risking one’s portfolio, protecting the downside, investing into non-market correlated assets etc all come to mind at this point.

On our end, our risk-based portfolios are in a defensive mode which should guard against the ensuring volatility. We have also introduced a thematic portfolio called “90/10” which seeks to provide investors with a lower volatility option on their investments in this uncertain market environment.

 

I will be conducting a “Diversified Investment Portfolio Construction” workshop to share the strategy and methods to DIY an investment portfolio to manage risk. I will share how the professional investment managers use Asset Allocation, Diversification, Core-Satellite strategy to build their portfolio for investors.

Seats are very limited. Sign up here https://www.eventbrite.sg/e/diversified-investment-portfolio-construction-workshop-30mar2017-tickets-31085303981

 

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