MALAYSIA STOCKS IN 2016-2018

Now till 2018, the stocks wiill be ICBC with a chance of >20% correction (possible recession).  The odds are against you.

Why?

1. Our major trade partner, China, is slowing down.
2. USA growth around 2%, with risk of recession due to QE trap.
3. Europe is growing at about 1%
4. Japan, Abenomics, back to deflation since 2013, will continue slow growth
5. Malaysia also effected by lower crude oil price, and there is a chance the price will fall to USD20 per barrel or less.
6. Similarly, Malaysia palm oil also lower, will follow the crude oil
7. Banking sector, besides oil and gas and palm oil sectors, will face a slowdown
8. Government stimulus will slow as a result of lower crude oil price
9. Consumer will tighten their belts as a result of currency depreciation, GST, toll prices increase and tighter lending from banks for properties

So, stock picking, or investment in value stocks is getting harder.

USA + CHINA + JAPAN

USD18 trillion + USD11 trillion + USD4.5 trillion = USD33.5 trillon vs World GDP USD75T.  USA+China+Japan = 44% of world GDP is facing deflation environment.  CPI is dropping.  So is PPI.

DOES BUY AND HOLD STRATEGY STILL WORKS?

Yes, but is getting more difficult.  Only strong blue chips that grow with good dividend yields will do well using this strategy.  Smaller stocks, will have shorter term cycle, i.e. face tougher competition.  Why is that? Because, world number one, two and three economies is facing contraction and low growth.  USA S&P based on latest Q315 results is doing at PE 21x and going forward, not expected high growh like 3-4% p.a.  Just like Malaysia, USA stock market is toppish.

So, when their share market drops, they will run to US Long Term Bonds.

BEST STRATEGIES

Case to case basis depends risk and tenure of investment and exposure to other currencies.  Coppers and Crude Oil price will fall further, double digits expected.  Gary predicts Crude Oil will fall as low as USD10-20 per barrel.  Many call him crazy, but, so far his forecast is spot on.