The New Year rallies - but when is it time to sell?
YTD, best performing market in Asia is the Thai SET (+6.8%), followed by Hang Seng (+5.9% YTD) and Jakarta SE (+5.8%). The early strong performance for the SET should not be a surprise, if we look at the average performance for the Thai market over the new year over the past 15 years, 13 year of those have registered positive performance (the traditional New Year rally!) averaging around 14% if taken from beginning of Dec to end of January.
However, this is not a Thai only phenomenon, in fact looking at the average performance for all the Asian markets over the similar periods, there has certainly been more ups than downs for all the markets during this time. The question to ask then is when to sell?
This is a trickier issue to handle and over the past years has ranged from anywhere in mid Jan to almost May (which inevitably tends to be the month to start taking some money off the table), or for some markets never! Even best performers of yesteryear may not necessarily indicate worst performer of this year. For e.g. see Mumbai, which was one of the top performing markets for last year, up 61% YoY, of which 5.8% comes from YTD, putting it very close behind Jakarta YTD. However, Korea, which was up almost 50% at the end of last year, is only up 0.4% YTD, one of the worse performing Asian markets YTD.
So where are fund managers looking to put their money this year (always a good indication of sustainability in the rallies). Most are now looking to increase their weighting in Thailand, after almost 2 years of disappointing performance, citing cheap valuations vis a vis the region (indicating that there may still be some legs in the rally in Thailand). Most are still bullish Korea and Hong Kong/China, citing strong growth prospects at reasonable (if not still cheap for Korea) valuations. Sectorwise, investors are focusing on technology, banking on another reasonable year for growth globally, whilst banking sector, given the strong growing economies in the region, is likely to also see positive benefits from rising loan growth and deleveraged balance sheet of corporates in Asia over past few years.
So time to sell? Not necessarily. Valuations in short term still does not look overstretched and growth prospects still look strong. With tech demand still remaining strong, OEM manufacturers likely to be positing some strong earnings growth (as well as strong textile sector demand given settling of quota woes) in 1H06. Longer term, I still feel quite strongly over the rise of the Asian consumer and still feel that this theme has lots of legs. Asian economies are in general viewed as export driven econonomies and the rise of the more discerning Asian consumer remains underplayed. However, how this long term trend will pan out in the short term remains to be seen. In meantime, ride on!
On the other hand, I don't necessarily like to follow the crowd, and will be digging deep into the Thai, Singaporean, Indonesian and Taiwanese economies for some deep value picks. We continue to feel particularly strongly about the consumer growth stories in these economies and have identified quite a few interesting small caps which offer strong growth prospects but at very reasonable prices. More later.
However, this is not a Thai only phenomenon, in fact looking at the average performance for all the Asian markets over the similar periods, there has certainly been more ups than downs for all the markets during this time. The question to ask then is when to sell?
This is a trickier issue to handle and over the past years has ranged from anywhere in mid Jan to almost May (which inevitably tends to be the month to start taking some money off the table), or for some markets never! Even best performers of yesteryear may not necessarily indicate worst performer of this year. For e.g. see Mumbai, which was one of the top performing markets for last year, up 61% YoY, of which 5.8% comes from YTD, putting it very close behind Jakarta YTD. However, Korea, which was up almost 50% at the end of last year, is only up 0.4% YTD, one of the worse performing Asian markets YTD.
So where are fund managers looking to put their money this year (always a good indication of sustainability in the rallies). Most are now looking to increase their weighting in Thailand, after almost 2 years of disappointing performance, citing cheap valuations vis a vis the region (indicating that there may still be some legs in the rally in Thailand). Most are still bullish Korea and Hong Kong/China, citing strong growth prospects at reasonable (if not still cheap for Korea) valuations. Sectorwise, investors are focusing on technology, banking on another reasonable year for growth globally, whilst banking sector, given the strong growing economies in the region, is likely to also see positive benefits from rising loan growth and deleveraged balance sheet of corporates in Asia over past few years.
So time to sell? Not necessarily. Valuations in short term still does not look overstretched and growth prospects still look strong. With tech demand still remaining strong, OEM manufacturers likely to be positing some strong earnings growth (as well as strong textile sector demand given settling of quota woes) in 1H06. Longer term, I still feel quite strongly over the rise of the Asian consumer and still feel that this theme has lots of legs. Asian economies are in general viewed as export driven econonomies and the rise of the more discerning Asian consumer remains underplayed. However, how this long term trend will pan out in the short term remains to be seen. In meantime, ride on!
On the other hand, I don't necessarily like to follow the crowd, and will be digging deep into the Thai, Singaporean, Indonesian and Taiwanese economies for some deep value picks. We continue to feel particularly strongly about the consumer growth stories in these economies and have identified quite a few interesting small caps which offer strong growth prospects but at very reasonable prices. More later.
posted by Kenneth | 9:31 AM
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