Outlook 2016

Looking ahead,  Navigating 2016 - by Chow Kar Tzen on 6.4.2016

1. Outflow 2015 - 20b. March 2016 - 6b inflow
2. Gold up 18.3% @ 18.3.2016
3. Adjustment process underway - 5 fundamental areas
4. Credit down cycle
a) EM low growth n commodity prices. 
b) DM on credit upcycle.
c) Household debt in Malaysia 87.9%
d) korea, Taiwan n Japan export decline near crisis level

5. Central bank
a) ineffective
b) meditative interest rate environment driving yields lower
c) weak US PMI
d) Eurozone unemployment n CPI necessitates QE
e) Japan CPI necessitates QE

6. China
a) Li Ke Qiang index at 2.3%, same as 2008
b) mfg remains weak, services holding up
c) Target GDP growth 6.5 - 7%

7. Currency depreciation
a) Yuan: key currency to watch. Stabilising

8. Commodity price collapse
a) CPO outperforming
b) Oil bottomed? Probably in 2017

9. Valuation
a) P/B MSCI Ex Japan - cheapest since GFC

10. Technicals
a) cash at elevated level - highest since Nov 2001
b) most crowded trades: short EM, long US$

11. Hwang's proposition
a) diversification - asset classes n countries
b) still optimistic on Asia - growing 5.4%