This is because banks are afraid to lend to
the main street firms except the very big names. And these guys do not even
need cash in the first place. The Microsofts and Apples of the world have more
cash than what they know to do with. In fact, they are borrowing to fund
dividend payments at home as they do not want to attract tax should they
repatriate their overseas income. This is the irony of the situation. All that
hot money created by the Fed is screwing our markets.
Why am I not that concerned? The markets
have long taken into account this eventuality. Our stock markets have been
doing well due foreign money trying to find a home. In fact, the South East
Asian markets have done well. They felt the pinch 3 months ago when these funds
pulled back but have since seen fund flows coming back. Be very careful as this
might be a very temporary recovery. The US economic recovery is slowly trying
to gain ground, but I have not seen very solid numbers backing up a firm
economic picture. If you want to know what signals to be watching out for, try
non-farm payrolls stripping out all the one offs and window dressing. Events
that will cause long term cost of borrowing to rise are indicators that I am watching
very carefully.
I am seeing a lot of Chinese money coming
in to support medium to large sized property transactions. I will share my
observations as to why in the next blog. Quality commercial will be ok for the
next couple of quarters but I do hope the government will monitor the
residential sector very carefully. Or an unforeseen international economic
event might cause mass panic given the exposure of Singaporeans.
For those investing in Singapore and
Malaysia, I need to point out to you that both economies are not doing that
great and companies will face challenges. Singapore’s non-oil domestic exports
are not picking up and the newly elected PM of Malaysia are now contending with
reining in the financial excesses pre election. The whole Iskandar region has
done well with international money flowing in but deals are slowing
drastically. In fact, many sellers have dropped their asking prices for land by
as much as 20% in the last 3 months. Invest with your eyes open!
Tomorrow is Mid Autumn, I would like to
wish you a Happy Mooncake Festival. This weekend is F1, so do enjoy the glamour
and glitz. Many thanks for your many boxes of moon cakes, and I wish you health
and wealth.
Till the next blog, take care and God
bless!
Your Friend
Andy Ong18/09/13