Q: How did you get your “predictions” right from two weeks ago?
A: Luck is better than smart. But you can try to make your own luck.
Since this column started in September, I have generally avoided making investment calls, as that role is left to the qualified analysts, experts and market strategists well covered in The Edge Singapore. This especially applies to specific stocks, even if examples routinely wade into the wider commentaries for past contexts and present references.
Nonetheless, it is hard to avoid the online chatter that I am talking up my own book. Hence in Issue 1005 (Oct 7), I put my allocation and home biases out there as part of the story.
Among others, there were comments about my access to private equity, for which the democratisation of access to better-quality products is a subject for another day. But quite a few observations centred on my lack of conviction for cryptocurrencies, the big sexy tech names swooned by investors across the world. There has also been surprise at my timely plug of the local market, especially consumer cyclical stocks. Not to forget a touch of China (through ETFs).
This especially since it coincided with the Straits Times Index’s recovery in the last one week in all three moving averages — 50-, 100- and 200- day — just when technicians two weeks prior were focused on deathly chart breakdowns. An old remisier friend wryly commented that charts are made by humans after all! Or the pervasive negativity over Chinese stocks that reached its shrill peak on Oct 5 (Bloomberg’s “Smart money from Soros to Elliot sounds alarm on Chinese stocks”, for example), professing that they do not have, will not buy or have sold (perhaps short!), given China Evergrande’s debt woes and wider policy uncertainty.
Smart or lucky?
To set the record straight, the timing of those calls was entirely coincidental. There was no way I would know that Prime Minister Lee Hsien Loong was going to say “open sesame” (gradually and carefully) on the Covid-hit economy on Oct 9. Nor did I have a crystal ball to know that China’s government would finally say nice things about Evergrande on Oct 16, or that the fine slapped on Meituan on Oct 8 was smaller than feared.
But I had an asset allocation, and I held true to my conviction about some macro themes and sectors. For shorter-term tactical positions, I did my own research using the plethora of tools available out there (for example, SGX Mobile App or MyGateway), and followed corporate announcements and news.
Reasons for investing (its business and market outlook) have not changed, then subject to internal limits, I may add more. If it has reached the limit, then I just hang on if nothing has changed. Now, if something fundamental has changed — and it is not just short-term market noise — then even if I am out of the money, I am out.
China’s tech sector recovered 10% in a week, but it was not without various 3-5% heart-stopping intra-day pullbacks. Such volatility is a trader’s wet dream, but is not for everyone — even if they are dexterous enough to go both long and short.
Mostly though, the coincidence of the timing boils down to luck. And I make a bit of my own luck from time to time. I do so by doing my (boring) homework; I keep a clear head to cut through the noise made by the media. I ponder how and why different actors in the marketplace move. Oh, and I keep this rule of thumb in mind: news comes after the markets move…
Avoiding cryptos
I avoid direct investments in cryptocurrencies. Random coins move up, or down, randomly. There is too much noise when Elon Musk tweets, or policymakers move (belatedly) to clean up, or El Salvador makes Bitcoin legal tender.
Cryptos are unregulated, they are being moved around but with no oversight. This is an “asset class” filled with influencers and influences that has no fundamental value of being backed by gold or fiat, save for the gobbledygook of blockchain (a great technology no doubt), adopted in contrived-use cases to help transact everything from popsicles to property. If one gets caught on the wrong side of a trade, there’s no real explanation other than Fomo (fear of missing out). Private wealth and institutional investors wade in, so that their clients won’t go direct, or worse, send their AUM to cross-town rivals. The investment case will be self-fulfilling… until it’s not.
I had lunch last week with a mother (in her 90s) and son (in his 60s) whom I respect. Like other “old money” families, they struggle to understand how it is that their relative wealth standing, built over generations in brick and mortar, has been eclipsed by new loss-making tech upstarts founded by people young enough to be their grandson (or son). After all, whilst they made some money in investing in the triple As (Amazon, Apple and Alibaba), other parts withered away in Enron, Nokia, Blackberry and Ericsson — the very names touted as the market leaders in their heyday. Yet these stories of crypto millionaires and billionaires are luring them to join the party — even if they had avoided the pitfalls of the nickel scam last year.
In a way, they are better off than Joe public who can ill-afford buying profitable plots, ostrich farms or gold guarantee schemes, as they would have some creature comfort to fall back on if the situation sours. And sure, many have missed the multi-bagger Sea since its October 2017 listing in New York.
You can have fun with a small part of your portfolio if you want to punt — with some research on good stocks and not based on rumours. But, a diversified portfolio of Singapore equities can give a steady cash flow from dividends for a reasonable total return of easily 5% to 7% per annum. Is it such a bad thing if you consistently increase your investment in this portion? Or, are some of us consigned to always looking for the greener grass, and blame anyone but ourselves when we get stuck in the inevitable quagmires?
Chew Sutat retired from Singapore Exchange (SGX) in July this year. He was senior managing director of SGX, and member of SGX’s executive management team for 14 years. He serves on the board of ADDX and chairs its Listing Committee. Chew was awarded FOW Asia Capital Markets Lifetime Achievement Award this year
Photo: Shutterstock
