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Monday, 1 February 2016

Tradeview - 2016 Outlook

Dear fellow traders, 

Once again, these writings are just my humble highlights (not recommendation), feel free to have some intellectual discourse on this. To join my telegram channel : or Email me to sign up as private exclusive subscriber : [email protected]

There have been many articles on market outlook for the year ahead at the end of 2015 and start of 2016. However, while many are enjoying the fireworks during the 2015 countdown, I am certain there are only a handful that predicted such a terrible start to the year.
Global equities market in itself is in bad shape. Not the worst. But real bad. Several key equities markets entered bear market territory. Just when people had that hope of a market rebound, the so called technical rebound could not sustain and once again bearish sentiment took over. I will highlight below some of the notable market prediction and provid a simple commentary for your reading pleasure. 

1. "January effect" for KLCI did happen in the first 10 days of the month for second and third liners. The euphoria was short lived before KLCI follow suit global market rout and have been on the downwards trends

Verdict : True for KLCI as it did happened albeit for only 10 days. False for the rest of the world.

2. "CNY Rally" as far as I see it appears to be not happening. A rally includes a rally in major blue chips, second and third liners along with the movement of KLCI index upwards. As of Thursday 28th February, it did not materialise. However, there was a major push on Friday a day after due to the unexpected BOJ cut. Although there is another week before CNY, the chances of a CNY rally is looking dimmer by the day. This is because it is only 4 trading days left and retailers likely will cash out for CNY. Unless "Foreigners" intend on pushing based on the perception that 1MDB issue is resolved and oil price has hit the reversal point.

Verdict : TBC with 1 week left.

3. Oil price will hit $15-$20 with Iran sanction lifted and will flood the market. So far it would seem the weakness in oil price remains. Apart from the cold winter blizzard that temporarily lifted oil price back up above $30 and Kuwait Minister talking about deal within OPEC and Non-OPEC producer to control the supply, oil price would look to be low for an extended period of time. Personally, I dont think it will hit $20 per barrel. However, if not for Msia being so oil reliant, low oil price is actually a good thing. 

Verdict :  TBC.

4. China hard landing is unavoidable, in fact he is observing it. Soros believes that china will contribute to global deflation due to their slowing growth and expect growth less than 7% for the years to come. Arguments on the other side by people like Dalian Wanda Wang Jian Lin is that China is merely transitioning from manufacturing to service sector. Hence, once the transition is successful, their growth rate will return. I do agree with this statement however, some level of slow down in growth for China is not entirely a bad thing considering their exponential growth for the past decades. The question in hand is whether hard landing or soft landing. Also whether the markets have priced it in or not. Additionally, there is the issue of Yuan devaluation, attacking the HK-USD peg which I have written in an earlier article here:

Verdict :  TBC.
5. Last year, Goldman Sachs predicted the US Fed will have 4 rate hikes through out 2016 after hiking 25 basis point in Dec 2015. Considering the terrible start to global markets, this target would seem too hawkish. In fact, the sentiment has showed 4 rate hikes will no longer be possible in 2016. Although it is still early in the game, I am of the view that it is unlikely Fed will hike rate at such a pace while disregarding the rest of the world. In fact, the low oil price make inflation targets a mere wishful thinking. Unless oil price miraculously rebounds, chances are, the Fed will not be able to ignore situation around the world to push ahead.

Verdict : TBA

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