Forget Password?
  1. Indices
  2. Commodities
  3. Currencies
Straits Times 3,162.22 -4.62 -0.15%
Hang Seng 26,468.95 -285.17 -1.07%
Dow Jones 27,147.08 +36.28 +0.13%
Shanghai Composite 2,999.28 +13.62 +0.46%
Daniel Loh: Buy Commodity-Related Stocks In 2015
Aspire, Thought Leaders | 23 March 2015
By: Lim Si Jie
Articles (169) Profile

2013 was the year of Japan. Nikkei index shot up to 16,000 from 8,000 in early 2013. 2014 was the year of China where the Shanghai Composite Index rose to 3,300 on the back of a late surge in market sentiments from the government stimulus. So here comes the most important question: What will be the prime investment for 2015?

Cheap Credit Pushing Stocks Higher

With the injection of capital into the European market, Germany’s DAX-30 index hit an all-time high of 12,000 on 16 March. European stocks will continue to rise as the injected capital flows into the financial market.

In a recent closed-door workshop, investment expert, Daniel Loh pointed out that “for the past six years, there was a major bull run. Many blue chips have already become fair valued or expensive”.

China’s Weak Economic Outlook

China’s poor economic outlook has led to the introduction of a series of stimulus government spending on local infrastructure.

As the SSE (Shanghai Stock Exchange) enters the second phase of a bull run, analysts will be scrutinising earnings of A-share companies. Most companies will be expected to miss its forecasts as the economy in China has not yet recovered.

China has already decreased interest rates twice in the past year in a bid to drive business activity. It does not seem like those two rate cuts will be the last. With China lowering its GDP forecast to seven percent in its most recent adjustment, Daniel cautioned that Shanghai’s bull market could potentially exhaust in June 2015.

2015: Year of Commodity Stocks

China’s slowdown in the past few years resulted in a lower-than-expected demand for commodities. It led to a three year bear market for the commodity sector, both physical commodities as well as commodity related stocks.

However, in view of the massive stimulus, Daniel anticipates that 2015 and 2016F data figures from the Chinese economy will improve gradually. Daniel gave a tip about commodity related stocks’ possibility of performing “once the Chinese economy takes off” as demand for commodities grow.

Accumulate Commodity-Related Stocks With Good Growth

The current depressed stock price of commodity-related stocks provide good opportunities for buy-and-hold long term investors.

Daniel believes that it is a ”good time” to accumulate commodity-related stocks which were able to “sustain its growth rate during commodities’ bear run in the past three years.”

Like Peter Lynch, Daniel believes that stocks with low PEG (Price Earnings Growth), i.e. less than 0.5, are the ideal picks for the long term. On top of that, these stocks should also have strong margins and RoE (Return on Equity) to ensure sustainability and growth.

Si Jie is no stranger to investing having started his journey at a young age. He is heavily influenced by acclaimed investors such as Benjamin Graham, Peter Lynch, and John Rothchild.

Please click here for more information about this author.

Join The Conversation
The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

All Rights Reserved. Pioneers & Leaders (Publishers) Pte Ltd. Best viewed with Mozilla Firefox 3.5 and above.