Finally, the Republicans have accepted Joe Biden’s victory after the Electoral College vote. This is great news for the global stock market, as the confirmation of the incoming global leader signifies that the largest world economy is ready to move on. The positive US Future openings on 15th December 2020 have affirmed this. In addition, the vaccine optimism plus higher oil price would see a celebrative window dressing in the forming this New Year. We can see almost all global market indexes have returned to the bull territory and have continued showing their strengths.
In Malaysia, the passing of Budget 2021 has eliminated a big uncertainty, for political stability is the keystone for a performing stock market. Since the KLCI has turned bullish a month ago, other sectors have followed suit subsequently, including the most depressing construction and property indexes.
So are we out of the woods already? Based on the macro development and the market performance, we can see some signs of recovery. To see things from a different perspective, let us look at the oil price, which is an important barometer for the economy recovery.
The companies or strategies mentioned in this article are meant for study purpose only. It doesn’t constitute any ‘buy’ or ‘sell’ recommendation. Please consult your financial professional if you want to make any decision.
The infographic shows the Crude Oil WTI Futures’ chart on 16th December 2020, and it shows that the crude oil has been hovering between USD$35-44 / barrel since June 2020 for six months. There were two months where the oil turned bearish before it returned to the bull region. At the time of writing, oil has stood firmly above the MA200 for nearly a month. This is a positive sign. But more significantly, it has filled the big gap that was formed in March 2020 after a few attempts. A big gap signifies a big resistance to overcome. Therefore, if it has filled the gap and stood well above it for over a month, it is a confirmation of an uptrend. Seeing the current situation, I would not be surprised if oil breaks USD$50 in the near term.
Before we get too excited after seeing the stabilised macro and micro condition, let us be aware of the potential threats, which could cause social and economic disorder.
Firstly, there is no sign that COVID-19 is nearing to an end. Not only are we hearing of more cases and casualties on a daily basis, there have been news on mutated virus reported. So far, WHO is still studying it and no one can tell whether the mutated virus is insusceptible to the vaccine. Furthermore, there were new cases reported in China’s Heilongjiang since the second week of December. All these tell us that the global health crisis is far from over.
Secondly, the geopolitical tensions across the world are not to be underestimated. The end of the U.S. presidential election does not mean the end of the dispute. President-elect Biden is facing the U.S that has never been so divided before. The friction between China and India, China and Taiwan, coupled with the provocative acts by some countries; has rubbed salt into the wound. Let us not forget the ongoing US-China trade war, because the change of president does not mean an end of the trade tension.
Moreover, we have not mentioned natural disasters, climate change and food crisis yet. They all can disrupt the economy too.
Not all is bad.
In almost every year, there were challenges to overcome and yet there were sectors that have thrived. Not everyone would suffer in a recession. As investors, our role is to discover potential industry and study them. The following sectors would stand a higher chance to perform in this year:
It benefits humankind.
Whether you like it or not, you would be part of the evolution, whether it’s 5G, automotive LED, electric car, or Artificial Intelligence, to name a few. The advantage of technology companies is that most of them offer products and services to the whole world, which gives them competitive strength.
You may therefore, peruse a few technology companies that have performed well in the past few years, such as JHM, D&O, Vitrox, Penta, Gtronics, UWC, Greatech, MI and so forth.
While the year 2020 has been harsh, it was nevertheless a year of opportunities. Let us be mindful of the risks ahead and continue discovering further potential industry in the next issue.
Binyuen is the founder of BY Enrich Resources and the author of ‘Life beyond the Comfort Zone’ and ‘Profit from Share Investment’. His books are available in the National Libraries in Malaysia and Singapore or online http://www.teybinyuen.com/profitfromshareinvestment