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Hu Li Yang: Stay Away From Long-term Investments Now
Aspire, Thought Leaders | 08 June 2015
By: Vance Wong
Articles (74) Profile

Hailed as the “Godfather of Asian stock market”, Taiwanese investment guru Hu Li Yang recently reminded everyone repeatedly to shy away from long-term investments. He explained that prolonged low interest rates and Quantitative Easing (QE) had pushed prices of properties and bonds to very high values.

US Interest Rates Hike

The market will experience a pendulum effect where share prices would fall back since they have increased to unreasonably high values. Hu Li Yang discussed about this during his speech at the Shares Investment Conference (SIC) 2015. He notes that current valuations of various assets also causing US Federal Reserve Chairwoman Janet Yellen to be worried.

Hu Li Yang emphasised that once the US Fed raises interest rates, all stock markets will be affected. This is also why Janet Yellen has been constantly dropping hints and talking about interest rates lately. She does not want to see the world entering a global financial crisis.

The Taiwanese investment guru said that investors do not need to guess and worry about the actual dates of the interest rate hikes. A very good indicator would be the yields on the US government bonds.

He pointed out that when investors notice that the yields on US 10 year bonds pass the three percent yield mark, some investors will start to shift their assets away from safe havens such as bonds.

This is largely because when bond yield rises, bond prices will fall. This fall would thus trigger a flight of capital away from bonds. As such, Hu Li Yang feels that the interest rates hike would most probably happen then.

Stocks Are Slightly Overvalued

Although most stocks in every stock market are currently in the slightly expensive range, it does not mean that investors would not be able to grab good stocks. Nevertheless, when the bull market enters the second phase (historial lowest value multiplied by two), all investors should be wary.

Furthermore, share prices are considered to be in the high-valued range when they continue to appreciate by a further 15 percent from that point.

Paradoxically, during times of high bullishness, investors might be able to enter positions in the market if such points a breached. This however is akin to catching a falling knife. Investors should be extremely cautious.

USD & RMB Good Currencies To Hold

USD vs SGD; Source: Yahoo! Finance

RMB vs SGD; Source: Yahoo! Finance

Following the impending hikes of interest rates, the US dollar will most probably get stronger. China’s Renminbi will also appreciate because of the funds inflow after the government’s liberalisation policies. Therefore, Hu Li Yang advises investors to hold two of these currencies.

With a Communications background, Vance has the passion to write with a purpose - to provide content supported with substantial evidence to vested readers.

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