Hop for the Best - Investment Outlook for Rabbit Year

[Dennis Ng]

Hop for the best 6 Feb 2011 Sunday Times

Dennis Ng was asked to share his views/comments on the Investment Outlook for the year of the Rabbit and what "attributes" of the Rabbit should Investor learn or adopt, when investing. This article is entitled "Hop for the Best" and published on 6 Feb 2011 in Sunday Times.

Year of the Rabbit holds promise for stock markets, but investors should still play it cautious By Lorna Tan, Senior Correspondent


Investors ushered in the Year of the Golden Rabbit last Thursday with much optimism.

According to the Chinese zodiac, 2011 is the Year of the Golden Rabbit.
Financial experts said that the past three rabbit years - 1975, 1987 and 1999 - were generally good years for stock markets, even though 1987 included an infamous crash.

Mr V. Arivazhagan, managing director of regional investment and treasury products at DBS Bank's consumer division, said the Asia ex-Japan total market index achieved annual returns of 60 per cent in 1975, 21 per cent in 1987 and 74 per cent in 1999.

Mr Vasu Menon, vice-president of Singapore wealth management at OCBC Bank, recalled that stocks ran up sharply after mid-October 1999, eventually leading to the technology bubble and a sharp correction in markets in the following year.

In 1987, stocks also jumped, but crashed in October - on a date known as 'Black Monday' - unleashing a global stock market collapse. And way back in 1975, it was a year of heady gains as the global economy finally recovered from an oil price shock.

So it seems as if this rabbit year may be a year of excitement and surprises, with prices typically jumping and hopping instead of going sideways, said Mr Dennis Ng, founder of financial education portal www.MasterYourFinance. com

As markets and economies continue their recovery, Mr Ivan Ossa, head of investment research at ipac financial planning Singapore, expects a positive showing.

However, he advised investors to proceed like a rabbit - cautiously - and be aware that the gains thus far, following the global financial crisis, will most likely not be duplicated this year given the risks still prevalent in the global economy.

Here are some attributes of the rabbit.
• Calm, gentle and quiet
Rabbits move at an unhurried pace and are tranquil and serene. Global markets should behave like that this year: calmer and less volatile compared with the previous year of the ferocious Tiger, said Mr Arivazhagan.

It signifies a year of consolidation and a slower, more placid pace of growth than in the previous year, as Asian markets implement tightening measures to control the pace of growth.

'2011 can be seen as an extension to the recovery efforts that began in early 2009. Headline growth should be lower than last year's as base effects are gone, and should return to average or potential growth,' he added.

• Year of the 'metal' rabbit
As metal is associated with strength and resolve, this year is expected to be more resilient and exhibit a toughness that will see economies and markets move at more stabilised and sustainable levels.

• Discreet, considerate and thoughtful
Opportunities within this year of consolidation are still plentiful, and investors should actively look out for good investment opportunities in markets where valuations are still modest. This is pertinent during such high inflationary conditions where real savings are easily eroded, said Mr Arivazhagan.

• A cunning rabbit has three burrows
This comes from Chinese folklore, suggesting rabbits prepare several exits/entrances for their burrows. Likewise, it is prudent to diversify your investments and not put all your eggs in one basket.

'Although the global economy is on a path to recovery, markets will continue to fluctuate, and in order for you to maximise long-term returns, the best wealth strategy continues to be diversification and investment discipline,' said Mr Ossa.

Investors should be cunning and conservative like the rabbit, avoid getting carried away by the expectation of returns, and instead understand well the risks taken when investing.

• Staying alert and agile
Rabbits have an acute sense of hearing and smell. Mr Ng's tip to retail investors is to be constantly aware of the global economic situation, overall market sentiment and any news events that might have an impact on stock markets. They need to be constantly alert to what is happening in the market.

'Be ready to change your market position as the situation changes. For instance, if the market turns and overall market trend reverses from uptrend to downtrend, we must be ready to 'jump' out of the market and cut losses instead of just staying put and doing nothing,' he said.

For instance, he managed to jump out of the stock market in 2008 by selling most of his stocks, and avoided the stock market crash that followed later that year.

Still, there is a difference between being agile and jumping when you should, and being 'jumpy' and moving in and out of the market at the slightest noise or disturbance. The latter is not encouraged, because if you trade actively you are likely to make only small gains instead of letting your profits ride the trend.

• Cautious and conservative
Security is also an important attribute of rabbits. This is good, as it means you are probably the kind of person who does not take unnecessary risks and may not be easily swayed by market noise or 'sexy' products, said Mr Ossa.

When reviewing your investments, read the fine print and ask your investment adviser questions about expected returns, risk and security, and find out the facts behind your investments. If time does not permit it, seek the guidance of an adviser who should have a clear process in managing your investment portfolio and a strategy that is tailored to meet your specific objectives.

• Acquisitive
Rabbits are acquisitive by nature and enjoy collecting quality items. So use this to your advantage by building up your portfolio with quality assets.

'Understand market dynamics and the importance of asset allocation, which research has shown to account for 90 per cent of a portfolio's results and performance. In addition, understand investment styles and the benefits they can bring to an investment strategy,' said Mr Ossa.
For example, from May 2000 to now, value companies in the United States have outperformed growth companies by close to 80 per cent.
lorna@sph.com.sg

Feb 6, 2011
Looking Ahead

Most financial experts are bullish about the outlook for equities compared to bonds in the coming year. Among the markets, Asia (excluding Japan) and emerging markets are expected to benefit from reasonable valuations, good growth prospects and capital inflows from developed markets to developing markets.

• Mr V. Arivazhagan, managing director of regional investment and treasury products at DBS Bank's consumer division

'We feel that equity bull markets will continue their run in 2011. Key positive drivers include the resilience of Asia ex-Japan economies despite rising interest rates, sustained recovery in the US aided by open-ended 'quantitative easing' by the Fed, low interest rates in key markets, relatively high equities earnings yields and moderate valuations.
The euro debt crisis and monetary tightening in Asian economies will moderate gains, but economic fundamentals and valuations should win out.

Commodities are likely to push higher through the course of the year, as the robust growth in Asia ex-Japan drives the consumption of these commodities. Investors can accumulate commodities as 'proxy plays' for long-term growth in China, and to hedge against higher US inflation in one to two years.

Gold, having doubled over the past 26 months, is likely to continue correcting into the first quarter of 2011. However, the correction is likely to be shallow, given the weakening US dollar. Gold has a very low correlation against other asset classes and is useful as a portfolio diversifier and hedge against the US dollar.'

• Mr Steve Brice, chief investment strategist, group wealth management, at Standard Chartered Bank

'The global economy remains in recovery mode with growth forecasts generally being revised higher. The outlook continues to be a tale of two regions with developed world central banks likely to remain stimulative while central banks in the emerging world are trying to deflate asset bubbles.

Overall, we remain overweight on global equities, although the risk of short-term weakness remains. We remain positive on the US, Japan, Hong Kong, Korea, Taiwan and Singapore equity markets. We have become more cautious on gold. While we remain generally underweight on bonds, particularly those of the G-7 world, Asian bonds should remain attractive in 2011. Our central scenario remains that the European fiscal problems get successfully pushed down the road, although this process is unlikely to be smooth and could bring with it periodic bouts of risk aversion.'

• Mr Dennis Ng, founder of financial education portal, www.MasterYourFinance.com

'Expect the unexpected in the Year of the Rabbit, where both opportunities and dangers abound.

The stock market is the place to be this year because of hot money and the recovery of economies in general. China, which was the worst market last year, might surprise us on the upside this year. The Singapore stock market might hit a new record high and, in terms of valuations, is a better bet compared to other regional countries, such as the Philippines, Indonesia and Malaysia. Still, I believe that global stock markets might crash at the end of this year or next year because I'm doubtful that the recent round of quantitative easing will successfully help the US economy recover.

Commodities might have a correction but might go up thereafter if the risk of rising inflation remains a threat. Between gold and silver, the latter has a better upside potential. Oil prices are likely to rise as the cold weather and other disruptions might increase demand and reduce supply.
In terms of foreign currencies, my preference is the sterling pound, which appears to have very strong support at the &pound1 to S$2 level. And if the European economies improve in the next few years, we might see the sterling pound recovering as well.'

• Mr Vasu Menon, vice-president of wealth management in Singapore at OCBC Bank

'We expect stock markets to remain volatile in the coming year as several uncertainties continue to loom on the horizon, especially the debt crisis in Europe and inflation threats in Asia.

Equity investors must brace themselves for intermittent pullbacks and even sell-offs, but these corrections will also create buying opportunities. We hold the view that the best investment strategy to adopt for this year is to buy gradually over a six- to 12-month period instead of trying to time markets.

Among the developed markets, we are turning more positive on US equities, where valuations are not high and where companies with strong balance sheets and attractive yields can be found.

Despite our caution on bond markets, selective opportunities can still be found among higher yielding credits in the Asian and emerging market bonds space.

In terms of sectors, we are also positive on the commodity sector. The robust growth in emerging economies like China and India should augur well for the sector, and we see the US dollar weakening in the medium term, which should also serve to boost the sector.

Gold has done well this year and we see more upside for the precious metal, aided by growing investment demand, continued global uncertainties and inflationary pressures in due course.'

• Mr Ivan Ossa, head of investment research at ipac financial planning Singapore

'Our outlook for the year remains optimistic but cautious. We expect performance this year to be driven by earnings, given that, in our view, margins have peaked. There are still prevalent risks in the economy that could create headwinds for markets later in the year: primarily inflation and central bank policy as well as resilient unemployment in the US.'
Lorna Tan

[Dennis Ng]

I was the only person in Singapore to have the view that Singapore stock market will do very well in Rabbit Year but after the rally in stock market, it might be followed by a Global Stock Market Crash, possibly in end year 2011 or year 2012.

Now another Singaporean (based in Hong Kong) though, Prof Chan Yan Chong wrote on 11 Feb 2011, also asks will stock market rally be followed by a stock market Crash?

By Prof Chan Yan Chong


The Year of the Rabbit has finally arrived to the delight of investors, as the last two rabbit years have coincided with major Bull Runs. The start of a major Bull Run usually spells the bursting of the bubble and/or the start of a bear market.

The previous Year of the Rabbit took place in 1999-2000, which was the period that culminated in the bursting of the tech bubble. Before that, we had a major stock market rally in 1987-1988 but that was followed by Black Monday in October 1987.

Will this Year of the Rabbit repeat past euphoria followed by major crashes?

There is every reason for the stock market to rally in 2011 simply because the US government is adamant on pumping liquidity into the financial system with QE II and, possibly even more, QE II and QE IV. The Americans are not alone in trying to print more money to keep the economy going.

When the Americans print more money, these monies will flow to every part of the world including Asia. Singapore will also benefit from the influx of money into Asia hence the stock market and property market will benefit. To put it very loosely, the selling of US Dollars for the Singapore Dollar will lead to an increase in the Singapore Dollar’s supply hence Singapore is also printing more money. Everyone in the world is also printing money.

Take Europe for example, who tried to defend the Euro when the PIIGS came under attack from speculators on the sovereign debt fears. The defense of the Euro came about by printing more and more Euro.

China was the first to understand the impact of printing more money. In November 2008, Premier Wen printed Rmb4 trillion to drag China out of recession. The money, too, came from the printing machine.

Tough times require extreme measures, and this is the favourite phase of global leaders post-financial tsunami. All the leaders believe that the financial crisis was unprecedented hence needed extreme measures to pull the world out of the great recession. The way to get out of the trouble was to print more and more money.

However, President Obama was too optimistic in the Year of the Tiger and thought that it was time to exit from the stimulus measures by draining most of the money away from the financial system. Citigroup repaid the loans from the US government and the money was kept in the treasury. When AIA launched its IPO in Hong Kong, the funds raised from the exercise was returned to the US government because AIG, too, took a huge loan from the US government when it almost went bankrupt.

The repayment of loans to the US government during the first-half of last year also resulted in a lackluster stock market. Fortunately Ben Bernanke spotted the problem that the US could fall back into recession and immediately introduced QE II to inject money back into the financial system.

North Africa and even the Middle East could fall into chaos if pro-US regimes lose control of the situation. Should anti-US governments come into power, a war could break out just like it did many years ago when the Egyptian government order the closure of the Suez Canal that led to a huge increase in shipping costs because ships needed to make a huge detour via the Cape of Good Hope. We should be fearful of inflation but inflation is welcomed by the stock market because it will encourage spending.

The Americans are printing money so that it can induce inflation. When there is inflation, people will spend money and companies will make more money. This is good for the stock market.

Hop for the best 6 Feb 2011 Sunday Times

Dennis Ng was asked to share his views/comments on the Investment Outlook for the year of the Rabbit and what "attributes" of the Rabbit should Investor learn or adopt, when investing. This article is entitled "Hop for the Best" and published on 6 Feb 2011 in Sunday Times.

Year of the Rabbit holds promise for stock markets, but investors should still play it cautious By Lorna Tan, Senior Correspondent


Investors ushered in the Year of the Golden Rabbit last Thursday with much optimism.

According to the Chinese zodiac, 2011 is the Year of the Golden Rabbit.
Financial experts said that the past three rabbit years - 1975, 1987 and 1999 - were generally good years for stock markets, even though 1987 included an infamous crash.

Mr V. Arivazhagan, managing director of regional investment and treasury products at DBS Bank's consumer division, said the Asia ex-Japan total market index achieved annual returns of 60 per cent in 1975, 21 per cent in 1987 and 74 per cent in 1999.

Mr Vasu Menon, vice-president of Singapore wealth management at OCBC Bank, recalled that stocks ran up sharply after mid-October 1999, eventually leading to the technology bubble and a sharp correction in markets in the following year.

In 1987, stocks also jumped, but crashed in October - on a date known as 'Black Monday' - unleashing a global stock market collapse. And way back in 1975, it was a year of heady gains as the global economy finally recovered from an oil price shock.

So it seems as if this rabbit year may be a year of excitement and surprises, with prices typically jumping and hopping instead of going sideways, said Mr Dennis Ng, founder of financial education portal www.MasterYourFinance. com

As markets and economies continue their recovery, Mr Ivan Ossa, head of investment research at ipac financial planning Singapore, expects a positive showing.

However, he advised investors to proceed like a rabbit - cautiously - and be aware that the gains thus far, following the global financial crisis, will most likely not be duplicated this year given the risks still prevalent in the global economy.

Here are some attributes of the rabbit.
• Calm, gentle and quiet
Rabbits move at an unhurried pace and are tranquil and serene. Global markets should behave like that this year: calmer and less volatile compared with the previous year of the ferocious Tiger, said Mr Arivazhagan.

It signifies a year of consolidation and a slower, more placid pace of growth than in the previous year, as Asian markets implement tightening measures to control the pace of growth.

'2011 can be seen as an extension to the recovery efforts that began in early 2009. Headline growth should be lower than last year's as base effects are gone, and should return to average or potential growth,' he added.

• Year of the 'metal' rabbit
As metal is associated with strength and resolve, this year is expected to be more resilient and exhibit a toughness that will see economies and markets move at more stabilised and sustainable levels.

• Discreet, considerate and thoughtful
Opportunities within this year of consolidation are still plentiful, and investors should actively look out for good investment opportunities in markets where valuations are still modest. This is pertinent during such high inflationary conditions where real savings are easily eroded, said Mr Arivazhagan.

• A cunning rabbit has three burrows
This comes from Chinese folklore, suggesting rabbits prepare several exits/entrances for their burrows. Likewise, it is prudent to diversify your investments and not put all your eggs in one basket.

'Although the global economy is on a path to recovery, markets will continue to fluctuate, and in order for you to maximise long-term returns, the best wealth strategy continues to be diversification and investment discipline,' said Mr Ossa.

Investors should be cunning and conservative like the rabbit, avoid getting carried away by the expectation of returns, and instead understand well the risks taken when investing.

• Staying alert and agile
Rabbits have an acute sense of hearing and smell. Mr Ng's tip to retail investors is to be constantly aware of the global economic situation, overall market sentiment and any news events that might have an impact on stock markets. They need to be constantly alert to what is happening in the market.

'Be ready to change your market position as the situation changes. For instance, if the market turns and overall market trend reverses from uptrend to downtrend, we must be ready to 'jump' out of the market and cut losses instead of just staying put and doing nothing,' he said.

For instance, he managed to jump out of the stock market in 2008 by selling most of his stocks, and avoided the stock market crash that followed later that year.

Still, there is a difference between being agile and jumping when you should, and being 'jumpy' and moving in and out of the market at the slightest noise or disturbance. The latter is not encouraged, because if you trade actively you are likely to make only small gains instead of letting your profits ride the trend.

• Cautious and conservative
Security is also an important attribute of rabbits. This is good, as it means you are probably the kind of person who does not take unnecessary risks and may not be easily swayed by market noise or 'sexy' products, said Mr Ossa.

When reviewing your investments, read the fine print and ask your investment adviser questions about expected returns, risk and security, and find out the facts behind your investments. If time does not permit it, seek the guidance of an adviser who should have a clear process in managing your investment portfolio and a strategy that is tailored to meet your specific objectives.

• Acquisitive
Rabbits are acquisitive by nature and enjoy collecting quality items. So use this to your advantage by building up your portfolio with quality assets.

'Understand market dynamics and the importance of asset allocation, which research has shown to account for 90 per cent of a portfolio's results and performance. In addition, understand investment styles and the benefits they can bring to an investment strategy,' said Mr Ossa.
For example, from May 2000 to now, value companies in the United States have outperformed growth companies by close to 80 per cent.
lorna@sph.com.sg

Feb 6, 2011
Looking Ahead

Most financial experts are bullish about the outlook for equities compared to bonds in the coming year. Among the markets, Asia (excluding Japan) and emerging markets are expected to benefit from reasonable valuations, good growth prospects and capital inflows from developed markets to developing markets.

• Mr V. Arivazhagan, managing director of regional investment and treasury products at DBS Bank's consumer division

'We feel that equity bull markets will continue their run in 2011. Key positive drivers include the resilience of Asia ex-Japan economies despite rising interest rates, sustained recovery in the US aided by open-ended 'quantitative easing' by the Fed, low interest rates in key markets, relatively high equities earnings yields and moderate valuations.
The euro debt crisis and monetary tightening in Asian economies will moderate gains, but economic fundamentals and valuations should win out.

Commodities are likely to push higher through the course of the year, as the robust growth in Asia ex-Japan drives the consumption of these commodities. Investors can accumulate commodities as 'proxy plays' for long-term growth in China, and to hedge against higher US inflation in one to two years.

Gold, having doubled over the past 26 months, is likely to continue correcting into the first quarter of 2011. However, the correction is likely to be shallow, given the weakening US dollar. Gold has a very low correlation against other asset classes and is useful as a portfolio diversifier and hedge against the US dollar.'

• Mr Steve Brice, chief investment strategist, group wealth management, at Standard Chartered Bank

'The global economy remains in recovery mode with growth forecasts generally being revised higher. The outlook continues to be a tale of two regions with developed world central banks likely to remain stimulative while central banks in the emerging world are trying to deflate asset bubbles.

Overall, we remain overweight on global equities, although the risk of short-term weakness remains. We remain positive on the US, Japan, Hong Kong, Korea, Taiwan and Singapore equity markets. We have become more cautious on gold. While we remain generally underweight on bonds, particularly those of the G-7 world, Asian bonds should remain attractive in 2011. Our central scenario remains that the European fiscal problems get successfully pushed down the road, although this process is unlikely to be smooth and could bring with it periodic bouts of risk aversion.'

• Mr Dennis Ng, founder of financial education portal, www.MasterYourFinance.com

'Expect the unexpected in the Year of the Rabbit, where both opportunities and dangers abound.

The stock market is the place to be this year because of hot money and the recovery of economies in general. China, which was the worst market last year, might surprise us on the upside this year. The Singapore stock market might hit a new record high and, in terms of valuations, is a better bet compared to other regional countries, such as the Philippines, Indonesia and Malaysia. Still, I believe that global stock markets might crash at the end of this year or next year because I'm doubtful that the recent round of quantitative easing will successfully help the US economy recover.

Commodities might have a correction but might go up thereafter if the risk of rising inflation remains a threat. Between gold and silver, the latter has a better upside potential. Oil prices are likely to rise as the cold weather and other disruptions might increase demand and reduce supply.
In terms of foreign currencies, my preference is the sterling pound, which appears to have very strong support at the &pound1 to S$2 level. And if the European economies improve in the next few years, we might see the sterling pound recovering as well.'

• Mr Vasu Menon, vice-president of wealth management in Singapore at OCBC Bank

'We expect stock markets to remain volatile in the coming year as several uncertainties continue to loom on the horizon, especially the debt crisis in Europe and inflation threats in Asia.

Equity investors must brace themselves for intermittent pullbacks and even sell-offs, but these corrections will also create buying opportunities. We hold the view that the best investment strategy to adopt for this year is to buy gradually over a six- to 12-month period instead of trying to time markets.

Among the developed markets, we are turning more positive on US equities, where valuations are not high and where companies with strong balance sheets and attractive yields can be found.

Despite our caution on bond markets, selective opportunities can still be found among higher yielding credits in the Asian and emerging market bonds space.

In terms of sectors, we are also positive on the commodity sector. The robust growth in emerging economies like China and India should augur well for the sector, and we see the US dollar weakening in the medium term, which should also serve to boost the sector.

Gold has done well this year and we see more upside for the precious metal, aided by growing investment demand, continued global uncertainties and inflationary pressures in due course.'

• Mr Ivan Ossa, head of investment research at ipac financial planning Singapore

'Our outlook for the year remains optimistic but cautious. We expect performance this year to be driven by earnings, given that, in our view, margins have peaked. There are still prevalent risks in the economy that could create headwinds for markets later in the year: primarily inflation and central bank policy as well as resilient unemployment in the US.'
Lorna Tan