2021 Semi-Annual Investment Portfolio Review

Portfolio Performances

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In terms of the individual fund performances, they are as follow:

What has changed over the last 6 months?

Long story short, 2 things have occurred over the last 6 months:

1) The Global market experienced a sharp rally mainly led by the optimism and short-term rally in the US Equity.

2) The Asian market experienced a sharp rally in January and February and had since been taking a beating mainly due to pessimism revolving around the COVID situation and the clampdown that the Chinese government had been taking on Tech companies.

What to expect over the next 6 months?

Both fundamentally and technically speaking, the market is long overdue for a correction back to normalcy.

From a fundamental standpoint, both the Price-to-Earning and Price-to-Sale has been trading way above their long-term average.

A higher ratio reflects the higher willingness of investors to pay for a similar level of profitability. When that happens, the future expected return will be reduced.

From a technical standpoint, the Asian markets are currently trading near the resistance while the Global market is trading outside of the long-term trend channel. Such short-term price movements would reflect a high probability of a correction as opposed to continued price increments.

However, the fact that prices are rising continuously does raise a certain level of concern for a correction in price or correction in earnings.

Looking at how things are going, a few key insights can be drawn:

1) The global market is posing a higher risk than the Asian market as the valuations and technical are way above what the normal levels should be.

2) A correction in earnings is more likely for the Asian market as opposed to the Global market given the difference in the earnings growth trajectory of both markets.

3) If things continue as it is, the Asian market will soon reach a fair value territory while the global markets will reach an even more over-valued territory.

And when the global market corrects itself to normalcy, chances are is that the Asian market will be brought down along with it thereby reaching potentially under-valued territory.

To show you what I mean, here is a look at the price and earning behaviour of both markets for the past 3 years (take note that Asia was dealing with the impact of trade war AND covid since 2018):

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Disclaimer:

This article is meant to be the opinion of the author

This article is for information purposes only

This article should not be seen as financial advice

The information that was presented in this article are taken from the websites of the respective named providers

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