Correction Triggered, Finally
Let’s see what we have last week.
1) US home construction starts fell in September to their lowest level in more than 14 years.
2) Consumer prices (inflation) rose at the sharpest rate in four months.
3) Turkey likely to be at war with Kurdish.
4) Oil price surged passed US$90 a barrel before it retreated slightly.
5) On Friday night (19 Oct 2007), DJIA plunged 366 points to 13,522.02 while the City (Singapore) was sleeping. The S&P 500 plunged 39.45 points to 1,500.63, and the Nasdaq Composite plunged 74.15 points to 2,725.16 in "celebration" of the notorious Black Monday 20 years ago.
Today, 22 Oct 2007, Monday, STI plunged 105.34 to 3,642.64
following the sharp correction in US market on last Friday. Twenty years ago, on 19 Oct 1987, DJIA crashed by more than 500 points for no apparent reasons, if I remember correctly. Subsequently, many theorists and economists offered their explanations; most of it doesn’t sounds like “English” to me. But what’s really amusing is that these people just can’t get over it. This is something that occurred 20 years ago. Anyway, whatever the reasons, I had long expected this correction to be triggered and I had gave many warnings to my friends and colleagues. The indexes everywhere are simply too hot and a correction is needed to cool it down.
What Should We Do?
If you ask me, the first thing you should do is don’t run! Do not follow the crowd; they are always on the wrong direction, unless you had bought some nonsense stocks. You run when you are sure of a recession. If it is just a correction, you should wait patiently for your turn to strike. Control yourself and don’t let Ms. Market affects you. I assured you that Warren Buffet didn’t dump his listed companies last Friday and not even today. I am willing to bet with you with my last cent. My advice is that you should stop looking at the stock market as this correction may go on for a while. But in my opinion, it will settle down soon. As far as Singapore is concern, our economic fundamental is strong, with forecasted more than 8% GDP growth this year. And then our IR project, I don’t remember that the billion dollar contracts had been awarded to anyone. Some small contracts yes but that’s about all.
Najeeb Jarhom, head of retail investment research at Fraser Securities, said (in Business Times) that the anniversary of the US market crash may have affected investor sentiment but it had no fundamental significance to the Singapore market. He said that “Monday's heavy falls on the local bourse should not be cause for alarm. Instead, they provide a good opportunity for bargain-hunters”. I share the same opinion.
Let’s see what we have last week.
1) US home construction starts fell in September to their lowest level in more than 14 years.
2) Consumer prices (inflation) rose at the sharpest rate in four months.
3) Turkey likely to be at war with Kurdish.
4) Oil price surged passed US$90 a barrel before it retreated slightly.
5) On Friday night (19 Oct 2007), DJIA plunged 366 points to 13,522.02 while the City (Singapore) was sleeping. The S&P 500 plunged 39.45 points to 1,500.63, and the Nasdaq Composite plunged 74.15 points to 2,725.16 in "celebration" of the notorious Black Monday 20 years ago.
Today, 22 Oct 2007, Monday, STI plunged 105.34 to 3,642.64
following the sharp correction in US market on last Friday. Twenty years ago, on 19 Oct 1987, DJIA crashed by more than 500 points for no apparent reasons, if I remember correctly. Subsequently, many theorists and economists offered their explanations; most of it doesn’t sounds like “English” to me. But what’s really amusing is that these people just can’t get over it. This is something that occurred 20 years ago. Anyway, whatever the reasons, I had long expected this correction to be triggered and I had gave many warnings to my friends and colleagues. The indexes everywhere are simply too hot and a correction is needed to cool it down.What Should We Do?
If you ask me, the first thing you should do is don’t run! Do not follow the crowd; they are always on the wrong direction, unless you had bought some nonsense stocks. You run when you are sure of a recession. If it is just a correction, you should wait patiently for your turn to strike. Control yourself and don’t let Ms. Market affects you. I assured you that Warren Buffet didn’t dump his listed companies last Friday and not even today. I am willing to bet with you with my last cent. My advice is that you should stop looking at the stock market as this correction may go on for a while. But in my opinion, it will settle down soon. As far as Singapore is concern, our economic fundamental is strong, with forecasted more than 8% GDP growth this year. And then our IR project, I don’t remember that the billion dollar contracts had been awarded to anyone. Some small contracts yes but that’s about all.
Najeeb Jarhom, head of retail investment research at Fraser Securities, said (in Business Times) that the anniversary of the US market crash may have affected investor sentiment but it had no fundamental significance to the Singapore market. He said that “Monday's heavy falls on the local bourse should not be cause for alarm. Instead, they provide a good opportunity for bargain-hunters”. I share the same opinion.
However, rising oil price is really a big concern. Take note that if oil price rise above US$90, it has reached historical high in “REAL” terms. This means that if we take into consideration the inflation rate, the highest oil price during previous oil-triggered recession was approximately US$90. Recently, I had highlighted to some friends and colleagues that with rising oil price, we should buy company that sells oil or in oil-industry related business. We should sell those who are drinking it. Citi economist Chua Hak Bin said (in Business Times) that “the economy remains supported by the financial industry as well as the construction and property sectors, where projects will continue regardless of high oil prices”. We share the same opinion.
OuHua Energy
One listed LPG company that I invested in plunged back to my purchase price. This is a China company - OuHua Energy. I could have locked in my profit recently but I did not. I intended to invest in OuHua for long-term. I believe LPG as a cleaner energy will have sustainable demand in the big China market. Current correction presented a good buying opportunity for those who have not invested in it. Certainly, if OuHua's price continue to fall, I'll average it down not because I need to, but I believe that it is a good investment. I'll put up my full analysis on OuHua subsequently.
