Wednesday, January 02, 2008


Macro Predictions For 2008

Oil Prices - To rise to US$115 per barrel before settling above the US$100 for most part of 2008. This will put simmering inflationary pressures globally.

Hot Spots - China to resume its economic machinery. Stock market will retest its all time high in 2008. HK will do even better than China yuan for yuan. Western Europe to attract much of M&A limelight away from US and developed Europe. Latin America to continue on its merry ways. India's fire will dim slightly.

Lukewarm - Rest of Asia will have to come to terms with inflationary pressures as local currencies may not rise enough to counter imported inflation, thus hurting outlook for local equities.

US - Will still have to deal with fallouts from subprime and property correction. Jobs the only factor sustaining the overall economic picture as many US companies still rely more on global growth for their bottom line. US rates will not have much room to fall as defending the dollar will be more of a priority - still we are likely to see the dollar weakening by 3%-5% in 2008.

US Stocks - A lot will be riding on the recovery of financials for index to perform. Pain before pleasure, probably things will improve from 2Q onwards. Depressed dollar will see more foreign M&A buying US companies. That will be creating a lot of pressure on the Fed and related units to stem the slide in the dollar. Corporate profits growth may not be as positive as 2007 and will cap the markets for 1H2008.

Japan - Economic recovery is failing as people still refuse to spend. Carry trade to continue.

Soft Commodities - All commodities to continue to rise, though not as spectacular as 2007. Palm oil should have another 10% in 2008. Biofuels no longer viable for now. Short plantations with biodiesel for idle capacity and extended cost recovery and possible writedowns.

Bursa - Hard for locals stocks to perform with markets at all time high. Favour stocks with strong foreign expansion strategy for growth: KNM, TM International, Ranhill, UMW, Evergreen, Parkson, (not B Land though). Short property stocks as affordability issue will come into focus as well as higher inflationary pressures (interest rates). A topping of most Asian currencies will erode some of the FDI into Asian property. Selective O&G stocks: Coastal, AZRB and Sapcrest. Some high profile foreign investment funds may start exiting critical stocks thus removing part of the allure: Pelikan, B Land, Stemlife, Mah Sing, E&O Property, Uchi, you know the rest. Finally, the Chua Soi Lek Award - still going strong: KNM.

2008 will be tougher than 2007.

3 comments:

Huang Shze Jiun said...

115 a barrel..... the horror. and once malaysia reduces the subsidy, it will be scary for my wallet.

Huang Shze Jiun said...

one more thing, regardless of how accurate your predictions turn out to be, they are deniately better than invest in more security systems etc. keep it up.

traderchan said...

Interesting insights there, I dont think 115 is high anyway adjusted for inflation(its still cheaper than a barrel of beer, hehe). Few of our greatest economists (Faber, Rogers) have predicted a commodity rally since 10 years ago, and this rally is still going strong. So many people are bullish in gold, I rarely hear people talking about gold being too high (except Goldman who always like to be a contrarian). Interestingly, gold hasnt risen as much as many other commodities. I wonder why.