Despite overhearing conversations on the streets lamenting that “the economy is not so good”, the throngs of locals and some foreigners dressed as princesses, empresses and court ladies (plus a random few photographer boyfriends and husbands dressed as emperors or officials in tow) parading in and around the Forbidden City in early autumn was a sight to behold. As far as domestic tourism is concerned, experiences are still sought after, with a whole lot of youth “employed” as wang hong (Mandarin for internet celebrity) to post on Xiaohongshu or Douyin — the original TikTok.
The other positive is that while life is not a Bed of Roses, the fierceness of internal Chinese competition in manufacturing and services, coupled with more accessible real estate prices, having burst the speculative bubbles and endured almost five years of deflationary pain, things are affordable, and potentially more sustainable economically as well as socially from here. While there is undoubtedly more vibrancy in the economic heart and centres in Shanghai and Shenzhen than in the more sedate capital, I remain a long-term bull in China. It’s a Miracle that they have more than survived the Bad Medicine of the Covid-19 pandemic and Trump’s trade war, which has been bruising Americans with its stranglehold on magnets.
Chew On This is pleased to validate and continue with this year’s “buy the dips” in Chinese ETFs call for the long haul. I remain convinced about Sasseur REIT, with its low-cost outlet shopping business model. I am also upbeat about CapitaLand China Trust, whose valuations have already been marked down. With the Shanghai listing of CapitaLand Commercial C-REIT, it can now tap the local REIT markets at book value. Both of these are good high-yield counters that pay investors for maintaining their exposure to China.
Keep the faith
See also: Wall Street’s macro traders eye their biggest haul in 16 years
Back through Japan, where I ventured to follow Japanese poet Matsuo Bashō’s footsteps on his Narrow Road to the North Trek in 1682 for the first half of this month. Save for some November rains on our 18km-long trek, we were rewarded with peak red autumn leaves, beautiful nature and many temple blessings in Unesco World Heritage sites.
Tokyo was lively and relatively inexpensive, with the SGD/JPY now at 118. The Nikkei 225 index has been on a Runaway since our dark horse call of 2023, as the Japanese economy emerged from decades of deflation with yet another all-time high posted after its new Prime Minister Sanae Takaichi got Donald Trump on her side. Perhaps that emboldened her to make comments on Taiwan that more recently upset the Chinese, who have proceeded to issue a travel advisory for its citizens not to go to Japan. If so, I am looking forward to planning two trips next year.
Japan’s domestic economy is in better shape, and it has started to absorb more foreign labour from different Asian countries into its ageing workforce. We encountered Nepali and Indian staff serving in ryokans and restaurants, not just Chinese or Filipino staff. This is important, as its super-aged population, with a net loss of a few hundred thousand people a year, requires labour to support its elderly and also for economic growth. While technology and AI can drive productivity, humans remain essential in sectors such as healthcare and services.
This has presented cultural and social integration issues, as well as political ones, which is why the Liberal Democratic Party finds itself in a minority government, apart from its own financial scandals. Should this be sustainably addressed, with security guarantees from the Americans affirmed by the promise of a Shot Through The Heart US$550 billion ($714 billion) investment in the US at the recently concluded trade deal, and more recent suggestions that Takaichi’s policies may not be as radical as her mentor’s Abenomics, USD/JPY may find a floor around 155.
See also: Asian stocks track US gains as rate-cut bets grow
Having stepped off the saddle of our dark horse, which has had a good run for the last three years, like our holiday plans, it’s probably Never Say Goodbye to the Japanese markets forever. I will be looking for opportunities to re-enter, perhaps in the new year, for a small long-term allocation to the Lion-Nomura Japan Active ETF, whose AI embedded has delivered a 31% return since launch less than two years back in SGD terms.
Burning bridges
Although the earth shook slightly while we were having breakfast in the hills of Japan, a few seismic jolts were felt more so in tech in the US, as warnings about AI exuberance from global central bankers and a few sceptical tech CEOs who broke ranks, as well as traditional fund managers, were issued. Investors accustomed to buying the dip in US tech have been left scratching their heads after markets seemed unable to regain their footing following the end of the US government shutdown.
Nasdaq’s October 29 high of 24,000 points has not been breached in November, while bellwethers like Palantir, down 16% from its highs, are still trading at over 400 times P/E. Nvidia had since given up US$400 billion in market cap after becoming the first US$5 trillion company, although it now has a more respectable 55 times P/E ratio.
One can probably argue that the “wonton buy the dip” US retail investors, shrugging off warnings and humming It’s my life have been proven correct every month of this year as the stale bull market in the US grinds out a new high every other month, while dips have mostly been shallow. Since the sharp post-Liberation Day bounce, it almost seems that the Story of Love has no end.
Well, there is another adage: markets can continue to rise on a wall of worry, especially when there are sceptics still present. This week’s news, however, is not quite the last bear turn bull contrarian indicator. But it’s pretty close. Michael Burry, the doctor-turned-investor and short seller who bet against subprime mortgages before the Global Financial Crisis and rose to fame in Michael Lewis’ The Big Short, has closed his hedge fund. Although this was not a direct consequence of betting against Palantir per se, the stories of his US$912 million in put option positions led to it falling 8% despite reporting some better-than-expected earnings.
Other famous hedge fund bears, including Jim Chanos and Nate Anderson, have also closed their shops in this relentless US bull market. Burry’s note to investors humbly declared that “my estimation of value in securities is not now and has not been for some time in sync with markets”. He also wrote on X before shutting his fund, “Sometimes we see bubbles. Sometimes there is something to do about it. Sometimes the only winning move is not to play.”
Sink your teeth into in-depth insights from our contributors, and dive into financial and economic trends
Indeed, that message resonates with this column, as we have stopped playing in the US markets this year, expecting a repeat of 2022 to follow soon. However, we are not betting against it, but just withdrawing capital back home (fortuitously). There is no need to be a hero and go down in a Blaze of Glory when the correction comes. Yes, it is always Slippery when Wet, especially when liquidity is high in the most popular stocks, but when it dries up, the falls might be much steeper.
Crush
This is what is being felt across the longer crypto tail-off from Ethereum to Doge meme coins. Chew On This pointed out in early November, despite the pardoning of Binance founder Changpeng Zhao by crypto-friendly President Trump and the Fed’s rate cuts, Bitcoin has sold off on risk-on and risk-off days, neither performing as a speculative asset nor as a hedge — as claimed by true believers — against conventional assets.
Gold, however, has risen to US$4,300 per ounce, dropped back to US$3,900, and climbed back above the US$4,000 marker amid rumours of the Chinese government’s secretive buying as an alternative to the USD and appears to be Wanted Dead or Alive by all investor segments. Fortunately, I have also been using my CPF 10% limit.
After Bitcoin hit its US$125,000 high, the shocking margin liquidations in an early October selloff caused a drop to US$100,000, which appeared to have dented the confidence of institutional and retail investors. An attempt to recover to US$114,000 failed, and it has since fallen by 20%. For crypto bros of late, Bitcoin has been You Give Love A Bad Name.
What about now?
With my travels for the year completed, I am happy to stay home in Singapore and Have A Nice Day until the end of the year. I plan to stick to my defensive investing posture, which involves staying with stocks denominated in the strong SGD and REITs, which continue to accrete even as the December Fed rate cuts could be delayed, and averaging up on a couple of Straits Times Index ETFs that I own on each minor pullback.
I will continue to research gems and special situations in a market of small and mid-caps, still trading at single-digit P/Es, to find some love like Nam Cheong’s surge last week. Post-Thanksgiving, I hope to unveil some presents and bank them closer to Christmas in this I’ll be there for You market, Always.
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
