2008 stock market in review

Year 2008 is a remarkable year for people around the world. We experienced many significant events – Beijing Olympics, US president election, Poison milk powder, Financial melt down etc. To stock investor, it was really a bad year. Can you imagine at one point STI was close to 4000 points? One year of brutal sold down erased many years of gain.

What happened?

The storm started way back in 2007 with US subprime problem. Before that, who on earth outside US knows what does subprime means? Subprime itself is only a trigger point to bigger issue awaiting the world. The US is over spending and came to a tipping point where the unwind has to be done. On hindsight, we should have sold all our holdings and keep cash, but again who knows?

Subprime is only an element in the complex web of problem. The key problem is over leveraging. US keep issuing bond, China keep buying.This keep US consumer spending, and China factories running. Bubbles all over the place – commodity bubble, hedge fund bubble etc. Many financial instituion bursted and credit is hard to get. World is now in recession.

We should treat this as lesson and not to let it happen again.

The situation now

The worst is not over yet. Majority of the economist forecast further contraction. From what I have read so far, nobody seems to have idea when we would be out of wood. 2009, most propably would remain anonymous while the economy is trying to pick itself up. Expect more job cut and bad headline every now and then. The problem is in this kind of environment, people would refrain from spending.

Many people are actually still doing ok. But, because of the headlines, they would cut back on their spending too to prepare for the “worst time”. This would accelerate the recession.

My portfolio

On hindsight, I should have cut main bulk of my portfolio to preserve the capital. However, as a long term investor, my mindset is really focusing on “long term”. There would be a need for me to re-think this idea and see whether this still applicable in Asia context. Anyway, the damage is done, we can only wait for the next upturn patiently.

Purchase of the year

Due to work commitment and the bad new headline everyday, I really didn't pay attention to the stock market. I did my small purchase when I thought it hit some sort of bottom. How wrong I am! There waves and waves of further sell down. Anyway, they are for long term – FJ Benjamin and China New Town.

FJ Benjamin is an attractive option to participate in the Singapore tourism boom. Come 2010, there are new selling points for Singapore. However, before that materialise, the current economy situation has already hit the retail sector. Never mind, when the economy recover, hopefully in 2010, the stock would be in time to perform. The wild card would be house brand – RAOUL.

China New Town had a strong debut on SGX. After that, it is all the way down, due to many incidents. Having fell from the IPO price of 0.80 to current level, those who still hold the IPO stock is having a broken heart. The promise of the company is always the land it holds and its connection. Personally, I think it would succeed given a few years and not being hammered by the credit crunch.Things to watch out for the stock are borrowing and china property market news.


Great Singapore Sale brought forward

Even though the Great Singapore Sale in June is still long way to go, but I think we already have it now. Notice that in past few months, we have all sort of sales. Retailers are trying to boost the dwindling sales figure.

As Singapore economy is very open, we are the first one to suffer, and maybe the first to rebound. Both internal and external demand is weak, it affect the consumer confidence. Another sales we are having now is the Great Stock Sales, but no taker yet.

US to save more

No doubt, US is in recession now, and they are not expected to come out quickly. The deleveraging process is painful and there is an urgent need to save jobs. The incoming president has already started work on the financial stimuli package to boost the economy. Since the trouble starts from US, it has to end at US too. US still consume a hell lot of world's goods.

However, the recovery would not be so swift. One of the popular present last christmas was piggy bank. US is start saving now! Even new jobs are created, it would take a while for people to start spending again. They would consciously save some money before they start spending.

The silver lining

US might take a whole to recover and start spending again. We hope China, in some way, is helping everyone out. They have the massive stimuli package to boost rural income and demand. The massive infrastructure building program should help to create more job and boost China economy. Hopefully this would create demand for more external goods.

The key thing now is how to create demand?