Sunday, January 06, 2008

Fundamental trends to watch for 2008 0 comments



(P.S: Sorry for any disturbances the advertisements above may have caused you)
Finally got around to writing this article. I wrote one last year (see link) and it served well as a guide for myself over the course of the year.

In the context of the volatility and some say possible recession looming in 2008, it is useful to note that there will be bull sectors during any part of the market cycle. For example, even in the stagflation years of the 1970s, not only did coal and energy-related stocks do very well, but one would also have made money if he had spotted the nascent high-growth small computer sector. A very useful book which lists out all bull sectors annually since the 1950s is William O'Neill's How to Make Money in Stocks.

At the same time, some of the themes below serve more as guides on asset allocation, rather than pin-pointing bull sectors. For example, the theme on global inflation.

Here I venture some personal views on likely trends for 2008. 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. Retail (especially luxury/specialty goods)
2. Rise of alternative energy (and associated infrastructure)
3. Global prominence as water engineering base
4. Liberalisation of utilities (power, natural gas, telecom)
5. Singapore MasterPlan 2008 and impact on property
6. Continued tight capacity in construction sector
7. Continued buildup/re-characterisation of Singapore's waterfront
8. Major M&A cycle in family-owned companies (to foreign interests)

Regional(ASEAN)
1. Vietnam property boom
2. The 9th Malaysian Plan (particularly infrastructure and water projects)
3. Plantations (in Indonesia and Malaysia)
4. Southeast Asia as an energy resource hotzone
5. ASEAN integration (with transportation links being first step)


Asia-Pacific
1. Basic infrastructure construction across Asia
2. Continued weakness in traditional export economies
3. Beijing Olympics
4. Increasing focus on environmental protection/conservation in China
5. Increasing focus on quality control of products in China
6. Rise to prominence of India (no longer in China's shadow) and Australia
7. Inflation in China
8. Possible conflict across Taiwan Straits
9. Continued tightness in shipyard capacity
10. QDII/CIC funds from China

Global
1. Soft commodities, especially agricultural (theme of the year)
2. Widespread inflation (co-theme of the year)
3. Shift in oil exploration cycle- deepwater exploration and rise of FPSOs
4. Secular decline in US consumption
5. Emerging Africa (particularly in resources)
6. Latin America as hard commodities hotzone
7. Major currency realignments (especially USD and Chinese yuan)
8. Rise of sovereign wealth funds

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

 

 

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