On Oct 12, Moomoo Singapore hosted its MooSummit 2024, inviting users to gain insights from three panels of experts. The event began with an introduction by Gavin Chia, CEO of Moomoo Singapore. The platform boasts over one million regular users, with 70% trading US stocks, while the remaining 30% is primarily divided between Singapore and Hong Kong.
In three short years, Moomoo has transformed its platform into a popular destination for investors and traders, driven by its user-friendly design and a wealth of tools. Its appeal is further enhanced by low commissions, allowing users to buy and sell across the US, Hong Kong and Singapore markets. Moomoo offers a diverse range of products, including stocks, options, funds, cryptocurrencies, futures and ETFs.
To kick off the presentations, Moomoo Singapore’s chief market strategist, Isaac Lim, cautioned that investors’ concerns throughout the year have not dissipated as the fourth quarter begins. The war in Ukraine persists and there are indications that a new conflict may emerge in the Middle East.
More pertinent to the market is the earnings season that has just started. “In the earnings season, big tech companies were doing well but were short of analyst expectations. If you score 90 out of 100, but analysts expect 95 out of 100, that could be the catalyst for a sell-off,” says Lim.
Furthermore, the Bank of Japan hiked rates for a second time, coinciding with tech earnings falling short. “The yen carry trade unwound and the Japanese market lost all its gains made in the first half, although the Nikkei recovered subsequently,” he adds.
Chinese stocks could still perform
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More interesting, however, is the Chinese government’s stimulus package, which began with monetary easing by the People’s Bank of China (PBOC). Its governor, Pan Gongsheng, announced measures such as lowering mortgage rates for existing homes and reducing banks’ required reserve ratio.
Lowering the RRR further for Chinese banks is estimated to inject RMB1 trillion ($184.1 billion) into the financial market by allowing them to lend more. Additionally, RMB800 billion was announced to strengthen China’s capital markets. This comprised a RMB500 billion facility for the stock market and an RMB300 billion facility to speed up sales of unsold residential units.
Grace Chiu, managing director of sales and business development in Asia at Direxion, says the stimulus packages announced raised questions about whether the rally is sustainable. “The stimulus package helped the market. It’s easy to boost the market by increasing liquidity. But China has some key issues, e.g. the property crisis, which is very serious and caused the slowdown of domestic consumption,” she adds.
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“I was in Shanghai three weeks ago. I had a conference call with our New York office, and everyone was very excited. The next day, I met domestic fund managers. Although they viewed the stimulus positively, there were so many ‘buts’. There is a difference between expectations of domestic and offshore markets,” Chiu continues.
In her view, Chinese GDP growth has decelerated to 4% to 5% a year. “The Chinese government and global investors have to accept it. The Chinese population is decreasing and the economy is changing from export-oriented to domestic demand-oriented. We need to see more stimulus to fix property issues and domestic consumption and the unemployment rate is 18% among young people. It will take some time to see whether the stimulus is effective.” Chiu also suggests it could take as long as six months to have an impact.
In the interim, she says: “My advice is to invest in a market where the government is boosting the economy. ETFs are a good way. It’s better not to bet on a single stock.”
Some popular ETFs are listed in Singapore, but more than 170 are traded on the more liquid Hong Kong Exchange. Older Singapore investors can opt for ETFs in Singapore dollars (SGD) listed on the Singapore Exchange S68 , while younger risk-takers could opt for ETFs on the Hong Kong Exchange.
The MooSummit took place just as China’s Ministry of Finance (MoF) held a press conference, which observers eventually found underwhelming. Nonetheless, Brian Arcese, Portfolio Manager of Foord Asset Management, notes: “Chinese companies are generating cash earnings and the market is inexpensive. The overhang is on the property side, where 70% of Chinese wealth is tied up. Over the past 10 days, we have seen the beginning of monetary stimulus, changes in regulation and changes in loan-to-value ratios. But China needs to stimulate demand. The MoF’s press conference announced that local governments could have access to special bonds. We don’t think it’s off to the races completely, but it could put a floor under the property prices.”
Will the US election harm the market?
Undoubtedly, the US election and whether it will hurt or benefit the markets are key sources of uncertainty in the markets. Sue Lee, Director, APAC head of Index Investment Strategy at S&P Dow Jones Indices, says historical data indicates that the US election is neither positive nor negative. In the fourth quarter of an election year, on average, the US indices returned 2.3%. In the fourth quarter of non-election years, the US markets returned 2.9%. This compares with the average return of all quarters of 2%. “So there is no real impact,” Lee adds.
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“The market cares about whether the US government is divided or united. Congressional elections happen every two years. The market performs better when the same party controls all three wings of government (the House, the Senate and the White House). When the government is united, there is a stronger push on policies and there is less uncertainty,” Lee says, adding that sectors are likely to have a greater sensitivity to these market drivers.
For instance, in the 2016 election, the market remained stable, but sectors were all over the place, adds Lee. Financials were up 14%, followed by industrials and materials. However, utilities and green energy fell by 5%. Thus, the US election could be a catalyst at the sector rather than the market level.
Terence Sia, portfolio manager at Grand Elements, believes that the market will be favourable for whoever wins. This is because most of the people supporting the candidate’s economic policy will be happy and there will be enough of the populace feeling optimistic about the result.
The Federal Reserve’s interest rate hike cycle has caused volatility in the past two years. Now that interest rates have stopped rising, Sia says the companies that have survived will do better as rates start to fall.
Dennis Quah, head of Singapore Wealth at BlackRock, says although sectors such as tech have longevity, he thinks the hype around AI is overdone. Still, opportunities abound across the AI value chain. “Many will fail and we identify those with a dominant position and strong moat. The companies we would like to invest in need to have a product that is of value globally, with a resilient earnings stream.”
Some themes are evergreen, such as healthcare. Regardless of whether candidate A or B is president, the population will continue to age, diabetes will remain a growing concern and obesity is unlikely to diminish, Quah adds.
The latest company to capture the interest of many investors is Eli Lilly, which received approval from the US Food and Drug Administration for Zepbound last year. In August this year, further studies showed that Zepbound reduced the risk of developing Type 2 diabetes by 94% in obese or overweight adults with prediabetes compared to a placebo. CNBC reports that according to US government data, one in three adults in the US are prediabetic.
Look to the under-the-radar sectors
Moomoo Singapore’s Lim says there are investing opportunities beyond the Magnificent Seven. Under the radar, names in the US are in the utilities sector. “Utilities used to be defensive and names like Vistra Corp used to be defensive. Year-to-date, Vistra is up 225% because it is one of the players going into nuclear power,” Lim says. “As AI demands more power, traditional sources will not be able to feed the power.”
On Oct 16, Amazon Web Services (AWS) announced it is investing over US$500 million ($655.4 million) in nuclear power in three projects in Virginia and Washington State. Northern Virginia is the largest data centre market in the world and AWS is Amazon’s cloud computing unit. Investing in nuclear power helps Amazon on its path to net zero. Amazon signed an agreement with Dominion Energy, Virginia’s largest utility company, to explore the development of a modular nuclear reactor.
Separately, Google announced it would purchase power from the small modular reactor developer Kairos Power. Microsoft revealed a partnership with Constellation Energy, which is associated with Three Mile Island, to support its data centres.
Arcese is also keen on the utilities theme. “We have had electricity volume growth since the global financial crisis. With the electrification of everything: trucks, cars, homes and shipping, there is demand for electricity. It is unloved and boring, but it also trades at lower valuations compared to the market. You can find regulated utility companies that are growing their volume and earnings and paying dividends provide a 10%-12% total return, which is ahead of inflation and they are viewed as low volatility.”
Lim was asked if the Singapore market could outperform. “Being in Singapore dollars, when you invest overseas, you have to convert your SGD and take into account exchange rate risk. For instance, in China, you may need deep pockets. The Straits Times Index appears to be capped at 3,600 in the near term. We think once interest in Chinese and US markets abate, we will see capital inflows into Singapore. The Singapore market is REIT-heavy and investors can use it as a hedge against volatility.”
“Think about applying these insights to your own investment strategy. Knowledge is power and you are better equipped to make investment decisions. The road ahead may be bumpy, but with the right knowledge, these challenges can become stepping stones to financial success,” adds CEO Chia.
