Goh Eng Yeow checks out the mood behind the regional stock market rally.
IN MARCH, there was a stench of fear in the air, as the share price of banking giant HSBC Holdings crashed an astounding 24 per cent in a day.
Those fortunate enough to pick up the badly bruised stock on that day are now laughing their way to the bank.
With the stock trading at HK$82.55 (S$15.25), HSBC has shot up a spectacular 150 per cent from a low of HK$33 on March 9, after raising US$17.7 billion from a rights issue to shore up its capital base.
The buoyancy in HSBC's shares is also giving a boost to other regional lenders like DBS Group Holdings and United Overseas Bank – now trading at 12-month highs.
Investors can be forgiven for wondering if there was a near cataclysmic collapse in the global banking system at all, after the failure of US investment bank Lehman Brothers last September.
August had kicked off to a good start yesterday, with bourses across the globe all registering gains as the good news on corporate earnings continued to pour in from companies across the board.
It is time for the bears to concede defeat, as the flow of liquidity is so powerful that it propels stock prices higher after each correction.
One market watcher has likened the current rally to the froth generated by churning a cup of cappuccino.
The more milk you pour into the cup and the more furiously you stir, the more froth you generate, he observes.
Eventually, things must settle down but for the moment, there is so much churning of blue-chips by the funds returning to the region that the market is likely to get more frothy going forward.
What is fuelling the run-up is the ability of these funds to borrow at next-to-zero interest costs in US dollar to punt regional markets.
And with the greenback weakening against all major regional currencies, they also stand to make a bundle from foreign exchange gains as well.
This is a scenario which is similar to that experienced in Japan when it slashed interest rates to zero to fight deflationary pressures a decade ago.
The end-result was a multi-billion dollar yen carry trade, as traders borrowed in the low interest yielding Japanese currency to make huge bets in emerging stock markets.
With the Fed also slashing interest rates to almost zero, the greenback has replaced the yen as the new carry trade currency.
Tags:
economy,
hong kong,
interest,
singapore,
stock market
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Temasek's Confusing Losses......
In May 2009, Straits Times reported:
"......net portfolio value dropped $58 billion - from $185 billion to $127 billion - between end March and November last year” (”Temasek made big gains”, ST, May 28).
Er...only in a country like Singapore the newspaper has this type of headlines Temasek made big gains when it lost $58B in 8 months. Those figures were based on what Minister Tharman said in parliament.
Anyway, then Ms Ho Ching said:
“In our Temasek Review last year, we reported an annual value-at-risk of almost $40 billion last March. This meant a 16 per cent probability for our portfolio value to drop more than $40 billion by March this year. Indeed, it has turned out to be so, and more.” - (Ho Ching's Speech at Institute of Policy Studies.)
This statement seems to imply that $40B (or more) was lost from March 08 to March 09. Ho Ching said they knew they were going to lose more $40B with a probability of 16% .Wow that is really amazing...now can she tell us how much more she will lose in the next 12 months and please give us the exact probability. I have never heard of a fund manager who lost money then turn around to tell his investors that he already knew he would have losses. She is telling us that Temasek had the future all figured out and none of this is unexpected. .....meaning she has not made any mistakes and is completely blameless!
Lets summarise:
Minister Tharman : $58B losses March 08 to Nov 08.
Ho Ching : $40B(or more?) losses March 08 to March 09.
Nov 08 to March 09 : $18B gain?
By disclosing the numbers so ambiguously, it caused the WJS to report that Temasek might have recouped some losses i.e. loss fell from $58B to $40B[Link] from Nov 08 to March 09. Is this possible?
Dow Jones on 28 Nov 08 was 8830, Dow Jones on 28 March 08 was 7609....fell 14%
STI on 28 Nov 08 was 1732, STI on 31 March 2009 was1700...down 2%.
Most market indices around the world were down from Nov 08 to March 09 i.e. stocks generally fell during this period. Commodities also fell sharply during this period. So how can it be possible that Temasek recoup $18B during this period given they are so broadly diversified?
Note that Ms Ho Ching said that Temasek lost "more than $40B". Most people take it to mean $40B-$45B. In this case, I'm not sure...and it is unlikely given what Minister Tharman told us earlier this year.
Why can't they publish quarterly reports like everyone else and save us from all this confusion? If companies as big and diverse as General Electric can provide a quarterly report, why can't Temasek?
Losses is one thing. The lack of transparency is another.The sad truth is Temasek lost money and ordinary Singaporeans don't know how much....
And the lap-dog ST stays hushed.
How say you Mr Goh Eng Yeow?