Fundamental trends to watch for 2007 0 comments

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Happy 2007! It has been a great 2006 but if I remember correctly, at the start of last year analysts were predicting that 2006 would see the easing of the global markets and that only truly good stockpickers would do well. How wrong they were. It may be fair to say that 2006 was the year when good money could be made by anyone willing to put his money into stocks (any kind).

In the stock market there are always themes that will dominate the attention such that even when the broad market is stagnant there will be sectors that outperform (there has to be). Broadly speaking, late 2003 (when the bull market started) was the technology bull; 2004 was the shipping/commodities bull; 2005 was the oil & gas bull; 2006 was the China stocks & property bull. What is palpable is a gradual shift in dominant themes from cyclicals-related themes to investment expenditure-related themes to consumption-related themes ---- in the same way that the benefits of a strong economy spread and filter through the masses.

Here I venture some personal views on likely trends for 2007. Some may be already mentioned in previous blog articles, in which case I include the link as well. For the new ones, I will probably writeup on some of them in the future.

Domestic
1. Construction recovery (theme of the year)
2. Oil & gas infrastructure buildup
3. Continued strength in high-end properties and shortage of premium office space
4. Rise of aerospace manufacturing/engineering
5. Strength in retail sector
6. Development as an educational/R&D hub and buildup of related infrastructure
7. Section 44 tax credits theme
8. Interest in unique Singapore brands (esp. consumer goods)

Regional(ASEAN)
1. Plantations
2. Energy exploration in Southeast Asia
3. Consumer demand recovery in Indonesia
4. GLC (government-linked company) restructuring in Malaysia
5. Emerging strength and interest in Malaysia property sector
6. Mass investor exodus out of Thailand
7. Rise of Vietnam as a low-cost manufacturing hub

Asia-Pacific
1. Basic infrastructure construction across Asia
2. Beijing Olympics
3. "Harmonious society" theme in China
4. Weakness in traditional export economies
5. Tourism in Asia
6. Rise of alternative power sources: nuclear power, natural gas, clean coal power

Global
1. Middle-East petrodollars as key global liquidity source
2. Middle-East basic infrastructure development
3. Russia as an economic superpower
4. Domestic economy expansion of India (eg. retail sector)
5. Rise of soft commodities
6. Multiple currency crises (domino effect)

Hopefully the last one won't materialise but it is a distinct possibility.

Be imaginative about playing the various themes and good luck to all of us!