What to consider ?
October 26th, 2008 | by winsonlee |
On Friday……A day when people look forward for the weekend.
What has happen….Blood has poured. Tears has shed. What you saw on the stock market board is only red.
Japan Nikkei stock index plunged 9.60 percent.
Seoul Korean Shares closed 10.6 percent lower.
Hang Seng Index closed 8.3 percent down.
Singapore share lost 8.3 percent.
Singapore has officially slid into recession on October 10,2008 as the gross domestic product (GDP) has falled for two quarters.
The second-quarter contraction has turned annual GDP growth negative, a drop of 0.9% for the first time since the asian economic crisis of 1997.
US government and FED tried 101 ways to avoid the country from recession. The government is pretty much screw up. GDP data for the third quarter will be released on Thursday and this will show that the economy contracted for the first time in seven years.
This is a global economy crisis. Might be something that you would have experience once in a lifetime.
Poor Alan Greenspan, Former Federal Reserve Chariman where people is putting the blame on him for being the culprit causing the sub prime mortgage crisis.
He was accused for keeping the interest low for too long period of time.
Australia is a resource rich country. But the economy is globalise, australia is not shielded from this crisis. Yesterday AUSSIE dollar was push down to 0.62 against US currency.
Investors in recent years have been borrowing in yen to take advantage of low interest rates in Japan, then using that yen to buy what were higher-yielding assets - commodities, emerging markets, the Australian dollar. Now that the global economy is slowing sharply and those assets are dropping in value, investors are reversing these bets and heading back into the yen.
source : http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=42046c43-f864-495d-a7e0-4e1596da3d66
With the low interest rate in Japan, people are borrowing to make investment that provides higher return in other country like AUS. But selling AU dollar to buy back YEN will not make them any better. Yen is now 13 years high. Do you really think increase of currency for the country is a good thing ?
Now with the yen’s appreciation, Toyota Motor Corp., Honda Motor Co., and other exporters are likely to see even less income when they convert their overseas earnings back to yen. Sony, for example, makes about 80 percent of its sales overseas.
News that Sony slashed its earnings forecast the day before only added to investors’ alarm, helping send the Nikkei benchmark stock index plunging 9.6 percent to 7,649.08, the lowest since May 2003.
Whole world economy is slowing down. At this point of time what should you be doing ? At this point of time, work extra hard to make sure that you are treated as part of the asset in your company intead of liability. With the economy slwo down, every company is looking for ways to reduce operations cost. Getting retrench is the last thing that you would it to happen to you. With the economy downturn, having a monthly income means that you will be having extra opportunity to make investment in the market. With the monthly savings, next you will need to do research on which company provides you better ROE. Look for company that gives you high dividend and low PE. If the company is still giving out dividend, this means that the company is still making money.
What am I currently looking at now ?
1) NAB (National Australia Bank)
2) WBC (Westpac Banking)
3) ANZ (Australia and NZ Bank)
4) BHP (BHP Billiton)
5) BSL (Bluescope Steel Limited)
6) OZL (OZ Minerals)
Bluescope was the last counter that actually cought my attention as the share slide from the 19 Jun 08 high at $12 to $3.85. For a company like bluescope, $3.85 looks rather attractive. 2008 Annual report can no longer be used to benchmark the performance of the share for the coming years as australia has not felt much of the pain from july 2007 to Jun 2008. I would expect that the profit for Bluescope and BHP would drop significantly for the financial year end 2009 as the global demands for the materials slows down.
