Potentially, the cast of characters could range from the January 6 Capitol Hill rioters; Ross Ulbricht, creator of the dark web marketplace Silk Road; George Santos, a Republican congressman who admitted to identity theft and fraud; and more recently CZ Zhao, founder of the Binance crypto platform, which enabled the success of the Trump family’s World Liberty Financial US$1 stablecoin, all of whom have been pardoned.
Therefore, US equity markets inched to new highs on expectations that the US Federal Reserve, flying blind to key economic data because of the government shutdown and under tremendous pressure, is poised for two more cuts by the end of this year. However, the parabolic rise in gold, which reached just below US$4,300, has faltered. Neither did Bitcoin regain its all-time high of US$126,270 on Oct 6 with Zhao’s pardon.
But hearts change, and Canada felt the mercurial trade negotiator in chief, who ended trade talks between the two erstwhile allies and close neighbours on a huff through a tweet. The reason? Ontario’s government ran anti-tariff ads using clips from a 1987 national radio address by Ronald Reagan. They were, of course, labelled as fake by Trump, perhaps venting on a weaker friend as the more closely-watched talks with China appear not to be going his way. In another manifestation of Taco, he withdrew his 100% tariff threat in early October, as expected by this column, and both Chinese and US markets largely ignored the administration’s proclamations on this front and crept further up.
This happens as China’s dominance in rare-earth processing and its willingness to use export controls and licences as weapons in a trade war first initiated by Trump seem unassailable in the near term. China’s US$12.6 billion in soybean purchases from Trump-supporting farmers last year have also whittled to zero, as Argentina is now the preferred source — ironically, a country being supported by US$40 billion approved by Trump, who has built a personal tie with President Javier Milei.
For those who trust market signals, all major markets, including China, have far outperformed the US this year — nominally, and even more so when adjusted for US dollar depreciation. Will it be a rainy November in US markets after Halloween? This column’s Cassandra pessimism has been wrong in the US, where what little there was in my Singapore-dominated portfolio exited gradually from May and completely by September.
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However, I have been more than amply rewarded in the “defensive” market, as our REITs and special situation calls have helped deliver supernormal investment returns of more than 30% year to date at the portfolio level. Luck is better than smart in an investment environment of many all-time highs — and thus not for the faint-hearted — but one can make some luck by doing more homework!
Sometimes I need some time, on my own
Do you need some time all alone?
I head off to Japan once again for the first half of November, and for some days we will be walking the Basho Trail in the North — named after 17th century poet Matsu Basho. A friend promises to read his poems along the way. I doubt I will be composing haiku, but it is always good to visit the country that was our January dark-horse market call a couple of years back, when no one was looking.
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We have been fortunate to go back twice a year since the Nikkei soared to an all-time high, leaping over several barriers and changing prime ministers. The USD/JPY has also weakened, even if the Singapore dollar has strengthened, making our holiday cheaper. That said, the Lion-Nomura Japan AI ETF, launched a year after our call, has still generated a reasonable 25% return from launch, with an annualised return in double digits. I have since sold, as the new Prime Minister’s policies may weaken the yen.
Also, the belated value discovery we have been talking about in Singapore for over three years has started kicking in more earnestly this year. Folks are still in disbelief that the Straits Times Index (STI) has returned more over the last five years than the S&P index, in part because of the strength and stability of the Singdollar and because it has almost half to one-third of the volatility of major equity indices, such as the Nikkei, HSCEI and Nasdaq. On a risk-adjusted for volatility basis, the Sharpe ratio is higher in Singapore.
There are still sceptics aplenty, so my fully concentrated portfolio of Singapore-listed stocks could still have legs to run, even if I stay cautious with some index ETFs, REITs and special situations for the rest of the year, having enjoyed the last few months’ resurgence in liquidity and interest. This seems likely to continue, as only $1.1 billion of the $5 billion in MAS money had been dribbled out in July, with more possibly coming in November. If so, the rain this month in Singapore may not just mark the start of the annual northeast monsoon but also signal more fund flows into the market, especially as value-up initiatives by the Monetary Authority of Singapore (MAS) and the Singapore Exchange (SGX) get underway.
Don’t you think you need somebody
Everybody needs somebody …
The macrogeoeconomic environment remains full of risks, and Singapore’s interest in supporting the rule of law and multilateral agencies as a small trading nation also requires us to deftly manage our key relationship with the US for both security and trade. The appointment of Anjani Sinha as the new US ambassador to Singapore is thus welcomed.
Assuming he is a friend of Trump and can call him when required, that’s invaluable, even if he has much to catch up on in terms of Singapore or the region, given the hearings, which roughed him up somewhat.
Bros of Trump do matter. It is claimed that Nvidia’s Jensen Huang dissuaded him from sending the National Guard into the Democrat-heavy San Francisco. Arguably, Silicon Valley is now less Blue as tech bros and venture capitalists have become more MAGA with Trump.
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In the local markets, at least, we have JP Morgan to thank. Having its asset management arm receive an allocation from the Equity Market Development Programme (EQDP) funds in July, the giant US bank was the first to set a target of 4,500–5,000 for the STI in late July, declaring Singapore equities to be the region’s number one “overweight” market.
This was at a time when still jaded and sceptical local houses, having seen the STI breach 4,000, were more circumspect, offering the tired old rehash of historical multiples. Some retail brokers, like Phillip Securities, did raise their targets and stepped up their coverage of small- and mid-cap (SMID) stocks, even by early October, when the STI had proved its resilience and strength. Others, like OCBC Investment Research, were still much more sanguine.
Having again outperformed sceptics in October — as Chew On This had called — and headed towards 4,500, JP Morgan has now raised its 12-month target for the STI to 5,000, then 6,000, supported by passive funds flow, lower interest rates and companies adopting value unlocking strategies — all the themes that we had suggested at the start of the year for why buy local.
Never mind the darkness
We still can find a way
Nothing lasts forever in the cold November rain
Not to be outdone, our local hero — DBS at its all-time high as a stock carrying up the STI — also projected a doubling of Singapore GDP by 2040, which could see both the STI at 10,000 and USD/SGD at parity. For retirees like myself, the prospect of 3% to 4% annual dividend yields with the additional 5% per annum compounding makes it reasonably compelling to stick around in this market. Without the volatility of other global equity indices whose valuations, like the Nasdaq, have exceeded the stratospheric levels of the meme-stock and dot-com eras, or the potential one-third depreciation of USD investment assets, whatever they return to, this overdue recognition of our market strengths is finally surfacing.
The cold November rain of persistent undervaluation of Singapore equities, especially SMIDs, too, will not last forever. Readers of this column will know that my bias comes from my past life as a prop trader 25 years ago, happy to take a quick profit with the mantra that “no one has ever lost money taking profit,” which has held true. Over the last few years of this column, many gems spotted have been “banked” too early, often in hindsight. But I have no complaints, happy to see my thesis played out. Sometimes, over and over again, not capturing the full up move but only some of the ins and outs in between, such as Sembcorp Industries’ revaluation from $1.50 to $7.50, and even in the recent correction and mild rebound.
Luck is better than smarts, but with the change in environment since July, not only have I repurchased STI ETFs sold in June when we crossed 4,000 points to bank at higher prices, but I have also continued to hold. I have also adjusted to “averaging up”— the hardest thing to do for an investor. Most of us foolishly do not cut losses and average down in a downturn.
This column also covered, some SMIDs that had characteristics including low PE, discount to book value, or companies that are part of new local super cycle industries like construction with positive growth of margins and profits, or having segments of business to spin off unlocking value were ripe for revaluation and or M&A. Many of the names that this column talked about in August have found new investors or fans gradually as they get covered by analysts gradually.
I am lucky to have stuck around and averaged up on Soilbuild Construction Group since then, as liquidity and price expanded. The early coverage by Phillip Securities and SAC Capital after its first-half results exceeded last year’s full-year numbers drew some eyeballs among those paying attention. Last month, CGS International and DBS Group Research issued their respective reports on this stock, whose market cap has crossed $500 million and whose average daily volume is above $1 million. Soilbuild has also announced a potential initiative of spinning off its precast segment. Guns N’ Roses will call this stock a Sweet Child O’ Mine for this year. I am doing more homework and hope to adopt others for next year.
Chew Sutat retired from the Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange. He was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore
