This article was written in collaboration with OCBC Securities. All views expressed in this article are the independent opinion of The Edge based on our research. Readers are encouraged to do their own due diligence prior to making investment decisions.
On Sept 15, World Health Organisation chief Tedros Adhanom Ghebreyesus declared that “the end of the Covid-19 pandemic is in sight.” However, the world’s economic woes don’t seem to share the same sentiment.
Markets in major economies have moderated or reversed their gains made in the post-Covid 19 rebound, affected by factors like interest rate hikes, the Russia-Ukraine war and China pursuing a “zero-Covid” policy.
As of Oct 14, the tech-heavy Nasdaq in the US, for one, has dropped by around 31.9% year to date, while the broader S&P500 is down 23% year to date.
Over in Hong Kong, a crackdown on Chinese tech firms and Chinese companies being affected by lockdowns has seen the Hang Seng Index (HSI) fall by about 20% since the start of the year.
Nonetheless, there are bright spots. Singapore’s Straits Times Index (STI), has remained relatively stable, falling just 2.7% year to date, as investors buy into the idea that the high-yielding stocks here have maintained their safe harbour status for investors looking for some shelter.
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While share prices of REITs in Singapore have been hit by the rising interest rates, especially as the cost of capital rises, banks, which make up a considerable proportion of the STI, have remained either relatively stable or have seen their share prices rise.
For example, as of Oct 14, DBS Bank and OCBC Bank have seen their prices rise by 1.3% and 1.8% respectively since the start of the year, although UOB Bank fell 2.4%.
Different strategies for different markets abroad
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Nonetheless, not all markets are equal, and as such, to take advantage of this volatile environment, one should be aware of the different market trends.
For investors who are taking a long-term view, the US market can be one to consider. Despite the recent volatility over 2022, a more macro view reveals another story.
Over the last five years, the US S&P500 index has risen over 43.7% as of Oct 14, which means if one has the patience to hold out through the volatility, investors could be looking at a gain overall. (see chart 1)
On the other hand, markets in Hong Kong are more volatile, even over the long term. In a Sept 16, 2021, report, the digital engagement team from brokerage OCBC Securities says “historically, the Chinese equity markets are no strangers to volatility.”
But a closer look will reveal that in the last five years, the Hang Seng Index has had many occasions where it has experienced multiple large double-digit swings in both directions (see chart 2). Since 2018 in particular, each upswing and downswing has taken place within the short span of only several months
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Similar upswings can also be seen in 2020 to 2021, although the Hong Kong market in 2022 has been hit by China’s continuing “zero-Covid” policy and rising interest rates.
What this means is that investors who have larger risk appetites can take advantage of these swings to make capital gains.
While the short-term view is that equities will be beaten down due to rising interest rates, history has shown that when interest rates normalise and inflation is reined in, equities would tend to rebound, providing capital gains for investors.
Share financing with OCBC Securities
Similar upswings can also be seen in 2020 to 2021, although the Hong Kong market in 2022 has been hit by China’s continuing “zero-Covid” policy and rising interest rates.
What this means is that investors who have larger risk appetites can take advantage of these swings to make capital gains.
While the short-term view is that equities will be beaten down due to rising interest rates, history has shown that when interest rates normalise and inflation is reined in, equities would tend to rebound, providing capital gains for investors.
To get our dedicated Trading Representative to contact you for a detailed portfolio analysis and to understand how share financing can value add to your portfolio, call 6318 2128 or email bizdev@ocbcsec.com. Visit iocbc.com/share-financing-promo for the details on the promotion and full disclaimers.
Disclaimer:
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