September 2015 has been a volatile month for stocks globally.
Many investors might be panicking or forced into selling off good assets, overvalued assets or undervalued assets. Looking at a few markets globally;
China: Shanghai Index (mainland)
- is up 31.16% in the past 1 year (1YR) and down 5.62% Year To Date (YTD)
U.S.: DJIA
- is down 3.53% 1YR and down 9.95% YTD
Malaysia: KLSE
- is down 9.62% 1YR and down 7.96% YTD
[Data: bloomberg.com 30/09/2015]
Other markets: Japan (Nikkei index) and Hong Kong (Hang Seng index) have also been on the slump as of late.
For simplicity sake, Volatility is defined as the up & down movements of stocks in markets. Stocks naturally go up and down, re-estimating the value of businesses based on their latest earnings and balance sheets whilst forecasting their future opportunities. Should a business stock be going down as of late, it is recommended to revalue your stocks (should you be unsure of your past valuation).
For fundamentalist (non traders), check whether are your businesses;
1) still to continue operations under normal conditions ?
2) will they still be able to churn out average returns ?
3) are their balance sheets unaffected materially by any recent interest rate/exchange rate/policy fluctuations ?
4) have you paid a reasonable price for future growth ?
Should all your answers be positive ones, then stick with your stocks. Inactivity during volatility is your friend unless currently you have decided to reposition your stocks intelligently.
Further, if you have purchased undervalued stocks and they are selling at lower prices with growth in sight, unaffected by global sentiments and factors, this could be the time to invest a part of your cash that you have been withholding as we suggested in January 2015;
[Note: A contrasted Global Investment Managers’ Outlook:
Kenneth Fisher of Fisher Investments is of the view that U.S. is in the late cycle of a bull market hence better returns for large cap stocks in the nearby future.
Tan Teng Boo of Icapital.biz/Capital Dynamics is of the view that stocks are to go down a lot more before recovering i.e. in the U.S. and Hong Kong.]
However, be aware of the country you are invested/investing as markets do react to governmental factors i.e. its stability, as such currently in Malaysia that have suffered a >20% devaluation of currency and a stock market slump, currently, to be/being propped by a RM20bil government initiated stock boost via ValueCap Sdn Bhd. Malaysia’s stock market slump is also a reflection of fundamentals i.e. oil prices and others (more in our July 2015 write up, last 3 paragraphs prior “Stocks In View” section;
Overall, the writer opines the best way forward is investing in a market/country that have conducive shareholder centric policies and regulations (U.S.). With that, market volatility will be partially circumvented by regulators. Further, investing in businesses of stable natures (Berkshire Hathaway), that are business and shareholder oriented should circumvent global economy volatility. Apportioning part of your portfolio for growth stocks is also recommended.
[Note: Investing in stocks of businesses operating in markets/countries that you understand sufficiently is a good way of overcoming structural shortcomings (volatility/risks affected by policies/laws) to an extent]
[Note: Investing in stocks of businesses operating in markets/countries that you understand sufficiently is a good way of overcoming structural shortcomings (volatility/risks affected by policies/laws) to an extent]
CHINA SLOWING DOWN HOW MUCH?
Most likely all stock market participants have been observing China’s economy and the world economy which according to many experts have been slowing down. No doubt China is slowing down whilst affecting business globally across industries. However, we still suggest a slowdown of the Top 2 largest economy growing at about TRIPLE the rate of the United States, having at least THREE times the consumers, have much more room to benefit long term shareholders, as long as prices paid for stocks were sufficiently low and not overvalued.
Investing in China is different from investing in U.S. or Malaysia due to many regulatory and legal differences among others. Assuming China’s government moves to a free market system gradually wherein businesses are allowed to dictate the overall economy alike U.S., shareholders should see tremendous returns assuming corporate governance is upheld at all times.
Alternatively, should China continue to successfully develop a mixed economy system, companies with superb management that are able to constantly adapt to government regulations and uphold shareholder centrism, should be very rewarding for shareholders. Global conflicts between China and the world however might distort this suggestion. However, president Xi Jin Ping’s visit to the U.S. recently might suggest China’s future path is to continue moving towards business based policies.
[Not to mention numerous other steps that have been taken by China to enhance their global business standing; i.e the silk road plans, AIIB, internationalisation of the renminbi]
[Not to mention numerous other steps that have been taken by China to enhance their global business standing; i.e the silk road plans, AIIB, internationalisation of the renminbi]
Despite the recent slowdown in China, retail sales continue to be robust. On a separate note, on a relative comparative basis, the middle class in China is opined to be wealthier than the middle class in Malaysia in terms of their spending power domestically. Moving forward, all consumer stocks and consumption based stocks that have superior management and corporate governance would be suggested as good stocks.
[ NO stock suggestions are given besides retail stocks previously mentioned (Parkson Retail Group) as there are much more factors that requires scrutiny i.e. stock market regulations and business regulations ]
Stocks In View
Parkson Retail Group & Stocks from previous months
Happy investing until next time.
[ NO stock suggestions are given besides retail stocks previously mentioned (Parkson Retail Group) as there are much more factors that requires scrutiny i.e. stock market regulations and business regulations ]
Stocks In View
Parkson Retail Group & Stocks from previous months
Happy investing until next time.
[DISCLOSURE: The writer currently owns minority stake in Parkson Retail Group among the mentioned stocks as of 30/09/2015 under his personal account. JR Capital LLP does NOT have any interest in mentioned stocks as of mentioned date.]
[DISCLAIMER: Everything stated in this blog is purely the opinion of the writer and any decision taken should be based on sound judgement with risks fully born by the decision maker. The writer shall bear no responsibility for any losses due to adherence of advices blogged by the writer or any commenters. Informational discrepancies are possible and will be corrected if any.]
