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7 Things Preventing The Bull In US, & Singapore
Aspire, Investments | 05 October 2015
By: Vance Wong
Articles (74) Profile

After a rollercoaster ride in the third quarter, most of us are hoping for the best that the last quarter would be better. Looking back, the US market rout and Shanghai Composite Index (SHCOMP) nosedive were just two major events that shook investors all over the world.

Right now, everyone is running to safety and stability. The persistent near-to-zero US Fed interest rates caused stocks to run up to high valuations, not only in the US, but around the world.

CNBC’s Mad Money host Jim Cramer, a retired fund manager with decades of experience, talked about seven things that are preventing the US market, and essentially the entire world market, from a bull market.

1. Stock Prices

Despite the market rout and SHCOMP nosedive, stock prices are still above historical averages. For Singapore, the Straits Times Index (STI) had declined about 20 percent over the past six months. However, prices are still not at levels that would be “ridiculous to sell”, as mentioned by Cramer.

2. Fed Interest Rates

As much as economists might argue that the market has already priced in the rate hike into valuations, no one knows for sure when the Fed will decide to raise rates. Before the judgement day, uncertainty will loom the market, not just the US, but Singapore and other countries too.

3. High-Debt Balance Sheets

Companies in the US like Volkswagen, Petrobras and Glencore are like “giant black holes” that needs to be filled. In other words, people are pouring money into these companies but not seeing numbers yet.

Nevertheless, Cramer did mention that recent numbers helped rally those stocks. In the context of Singapore, black hole companies are those with stocks that are trading at absurd Price-to-Earnings (P/E) ratios.

4. US Dollar Strength & Stability

Although the Euro is strengthening against the Dollar because of recent shifts in European monetary policies, emerging markets have contributed a fair bit to the Dollar’s strength. A strong Dollar will make it hard for US companies that depend on exports; Singaporean investors vested in those companies would see a decline in stock prices as a result.

5. Weak Chinese Production

To Cramer, Chinese industrial production is important for the world’s economic growth. China have been the world’s biggest importer and exporter for some time, but slowing down recently. Without its recovery, a sustainable bull run would not be possible.

6. Softening & Volatile Energy Sector

The energy sector has been on a roller coaster ride for the past year. This is also one of the reasons why emerging markets are underperforming right now. Once reasonable stability is restored in the energy sector, pressure from high-yield bond markets will be transferred. This would mean that local investors would see opportunities in oil and offshore sectors.

7. Earnings Report Next Month

Investors must analyse if the estimates of earnings next month are too high for the current economic climate. If estimates are not reached, stock prices will fall. Investors with positions in those stocks should definitely look to sell or at least cut them.

Investors’ Takeaway

While Cramer discussed about how those seven factors would affect the US economy, the Singapore economy will be affected inevitably. As such, investors should look out for the above factors as indicators that we are entering a bull market. Of course, proper research is still needed.

Still worried about when and how much would the US Federal Reserve hike interest rates? Do you have burning questions that you want to ask regarding the China economic slowdown and SHCOMP nosedive in June? Are you confused if any of the external factors from other countries in Asia will affect your Singapore stocks portfolio?

Catch renowned investors and speakers with rich experience in the stock markets, who have had witnessed multiple stock market crashes and global recessions over the years at Shares Investment Conference 2015!

Speaker profiles

1. Dr Chan Yan Chong, a renowned investor with more than 25 years of experience and the MBA programme director & associate professor of business school at the City University of Hong Kong.

2. Kevin Gin (CFA), the Founder and Principal of Alpha Capital. He was the former COO for CITIC Securities, Head of Singapore and Regional Real Estate Research for Kleinwort Benson Securities Asia (now part of Credit Suisse) and Head of Greater China Property Research with Yuanta Securities (Hong Kong)

3. Louis Wong, one of the most experienced fund managers in Hong Kong. He has over 25-years of solid experience and track record in the financial market. He was awarded Best Financial Analyst for 3 years by the Putonghua Channel of Radio Television Hong Kong and is also a part-time instructor of several investment courses in various Hong Kong universities.

4. Daniel Loh, an investment coach that specialises in equities and derivatives trading, he appears regularly on local TV financial programmes like “Good morning Singapore” and “Hello Singapore”.

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

Please click here for more information about this author.

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