Friday, December 04, 2020

Asset bubble near despite stock rally 

Jun 23. 2019
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By Special to The Nation

All major economies of the world appear to be pursuing a weak currency policy, according to DBS Bank research report issued last week. As inflation disappoints on the downside, a weaker currency should reduce deflation risks, but only in theory.



 Strong doses of zero rates and quantitative easing have not managed to create sustained inflation in Japan, EU or the US, although the exchange rates have moved about considerably. The notion that growth can be boosted through competitive devaluation is outdated as per DBS Bank view.

 The recent global stock markets rally seems to be against their fundamental. There are hopes for excessive interest rate cut this year and a positive development in China-US trade tensions. Cheap money will drive up asset prices as it has done so during the massive expansions of major central banks balance sheets in the aftermath of the crisis. Lastly, the US Federal Reserve under Jerome Powell seems to follow than lead the market. Asset bubble is near. -Thanawat Patchimkul, Head of Research, DBS Vickers Securities (Thailand)

Investors hedge against

global uncertainties 

Trinity Securities has lifted the SET Index’s trading frame to 1,650-1,750 points from PE expansion in light of the global interest rate downtrend. The SET Index is targeted at 1,750 points in the third quarter of this year, given the forward PE of 15 times (bull case). Next year’s market EPS is estimated at Bt117.

 We follow the geopolitical risks between United States and Iran. It is the short-term positive sentiment to oil stocks, we suggest let profit run. PTTEP still has upside risks to its price from the July 1-2 meeting between Opec and non-Opec countries which is expected to come out with a decision to extend the crude production capacity reduction by 1.2 million barrels until the end of this year. 

 Based on this, investors buy gold as global interest rate declines, rise in global financial liquidity which is about to excess again, demand from central banks around the world and lower risks to EM crisis which lessens pressure to sell gold - a good hedge against uncertainties such as the trade war, tension between the US and Iran and Brexit. We prefer at least 10 per cent of gold in investment portfolio. - Research Department, Trinity Securities


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