A British comedy franchise comprising 31 films, four Christmas specials, a television series and stage shows between 1958 and 1992, Carry On’s humour was based on innuendos and making fun of British institutions and customs. Like John Cleese, Terry Gilliam and Eric Idle’s Monty Python, much of the self-deprecating humour, satire and outrageous skits staged were part of a world that no longer exists today. A world where we could laugh at ourselves in a simpler, less woke world without the risk of offence taken by race, religion and “me too” and one where we could live and let live, keep calm and carry on.
The recent racial riots in the UK are a sad case in point. The disturbances show how fragile communities and societies can flip on a spur. Accentuated by online self-radicalisation or hate, little sparks can start bonfires nationwide. It did not help that famous folks like Elon Musk were re-tweeting false information from across the Atlantic, declaring civil war in the UK. It may well be an agenda of the Republican right that suggests conspiracy theorists amplify the fault lines in the UK over immigration and Islam to tarnish Kamala and the Democrats with the same brush. Or was it pure coincidence?
For the unfettered free speech activists in Singapore, however, they should know that the calm that has since descended after the initial flashpoints stoked by online hate only took place when our liberal colonial masters adopted some uniquely Singaporean laws. Kier Stammer’s Labour Party’s accelerated prosecution of keyboard warriors and quick custodial sentences drove home the point that warriors who hide behind a keyboard to disseminate hate are culpable for the violence they incite. In just over a week, the tensions have simmered down. Just like global markets after their early August rout appear to be marching back triumphantly as traders come back from the beach and the market storm blows over — for the time being.
Persuasion
Indeed, when investors want to look for hope, nothing stands in their way. Japanese Prime Minister Fumio Kishida’s announcement that he was standing down had no impact on the Nikkei and Topix rising back to levels before the dramatic falls, which were already in a corrective phase following mid-year records. Indeed, the carry trade that blew up markets a few weeks ago is back in fashion. Bloomberg data shows yen shorts have risen close to 50% as risk assets rebounded. If this holds until the end of September, my trip up Mt Fuji, where I will bring along the Community Chest Sharity Elephant as part of my Heartstrings Walk campaign, will be a little more affordable.
The market in Japan moves to its own beat, irrespective of who is in charge politically, even if the yen is a beneficiary of any global bouts of risk-off or risk-on, hence reducing volatility both ways. The Singapore-listed Nomura Lion Japan ETF is back to par with the “self-hedge” because of its Singdollar listing currency. Closer home, the August drama in Bangkok, where former Prime Minister Thaksin Shinawatra appointed his daughter as the new PM and received a royal pardon, was the cue for some to ask if Thailand is now back in play and whether cross-listed Thai stocks on the Singapore Exchange S68 or Thai ETFs could be a bet after a two-year correction when emerging market investors left for India instead.
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Frankly, who knows if the dust has settled? It appears that Thai conglomerates are still hedging their bets, seeking funding outside Thailand. I will wait; just like with Indonesia, the wayang kulit (Indonesian shadow play) may still have a few acts left before the current political calm anchors itself on a firmer political footing. Likewise, while VIX, Wall Street’s fear gauge, has calmed down back into the mid-teens, it will take a lot more than this to persuade most investors that a convincing run to make new highs again is in order.
We may meander into September’s anticipated Fed Funds Rate cut with mild positivity as bankers return from their summer holidays to clinch some deals and IPOs. This positivity requires stable assets and a narrative of a US economic Goldilocks scenario that is not too hot and not too cold, where future rate cuts are forthcoming to ensure a soft landing without an election in the background.
Pride and prejudice
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While risk assets are generally rallying for now, including a mild renaissance for sharply oversold US tech, it may be fortunate for Temasek, which was reported to have added US large tech stocks from April to June, just before the selloff in July and August had they not taken profit yet at the peak. The following quarterly report may show just that, so we should suspend prejudiced sniggers about the timing of increasing US weightage in the portfolio. After all, only time will tell.
Interestingly, ahead of the stock rout, hedge funds Citadel and DE Shaw sold half or more of their holdings in Nvidia. Both funds are clearly on the side of Elliot, which called a bluff on Nvidia’s valuations back in June. On the other hand, Temasek may be in good company as top quant funds, including Renaissance Technologies, Two Sigma and Man Group, and London’s Marshall Wace, added the stock.
Pride aside, risks abound. It may be telling that crypto has not rallied as much to pre-jitter levels. Bitcoin is still a moonshot. Most equity markets and stock recoveries have retraced just over two-thirds of the technical level known as Fibonacci’s resistance — a mathematical number or sequence Leonardo Da Vinci used in his art and architecture.
As calm ostensibly sets in on most risk assets, gold breached US$2,500 ($3,274) per ounce — another sign that not all is in order. Commodity and consumer demand weakness, from metals spilling out of Singapore warehouses to tepid US consumer confidence, are all out there if we care to look beyond the comfortable market headlines because markets are temporarily rebounding on expectations that the risks of a US recession are over.
Chew On This has been convinced that US markets will not completely collapse before November’s election. The bout of indigestion in early August portends how fast and furious it could be when the tide turns. I am also convinced it does not matter who wins the election, even if the prospect of Trump losing and denying the result could be a tad messy and create short-term uncertainty on top of his ability to flip-flop and change rules and agreements.
Big business and Silicon Valley venture capitalists appear to have rallied behind Trump because of the fear that Kamala Haris’s economic policies will be classic Left, raising taxes for innovation and capital gains for private equity, which is not good for business and markets mid-term. As markets calmed down, the stock price of Trump’s Truth Social (the “pure trump trade” my column talked about last month) eased inversely to the Democrats’ polling momentum.
Biden recorded atrocious polling before his withdrawal last month. Although long forgotten, the peculiarities of the US Presidential election depend on the electoral college votes from a few swing states in the Rust Belt (Pennsylvania, Michigan and Wisconsin) and the Sun Belt (Arizona, Nevada, North Carolina and Georgia). As markets recovered alongside the Democratic convention and positive news flowed on the appointment of Minnesota governor Tim Waltz as the Democratic vice-president candidate, the colours on the electoral map have flipped from red to blue or at least a tie. Over too much Maotai at dinner last week, our party of nine, with a few more polling on WhatsApp, forecasts a narrow Trump victory by seven to six. However, the consensus was that it might be time to bring money back from the US. As the conversation went, if China is not ready, Singapore’s safe haven market could deserve another look.
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Sense & sensibility
Coincidently, after last week’s column was written, the Singapore Exchange (SGX) finally broke through $10 convincingly, finishing last week at $10.39. I retired at the end of July 2021, when it was around $12. It lost the $10 handle by September and had stayed below for three years. There are rumours of buying by institutional investors and even the Chinese. I am not sure about this, but perhaps the market is anticipating volatility ahead, and institutional investors, with allocations in Singapore financials, could find solace in SGX if they rotate out from the banks.
Investors should recognise that the privatisation of an undervalued company occasionally is part and parcel of capital markets. Therefore, we should stop making a big deal of it when it happens here. Listed in New York, the biggest market in the world, it was announced last week that PropertyGuru is to be privatised by EQT Private Capital Asia at US$1.5 billion.
Mainstream financial media regurgitated press releases to say how the privatisation price was at a 75% and 86% premium to the company’s 30-day and nine-day volume-weighted average prices on May 21 and 52% higher than that day’s close when media speculation about a forthcoming deal broke. None of them referenced that it has been under two-and-a-half years since it was listed at US$8.61 in March 2022, when SGX was criticised for losing another unicorn.
The US$6.70 price for a company that barely makes a profit finally allows TPG and KKR to exit, albeit at 22% below the price to new IPO investors. The “tech company”, which failed to list in Australia initially but got a “premium” IPO valuation in the US, meandered down to US$3.14 on Feb 24. Beauty is in the eye of the beholder, so EQT should have done its sums and planned for its future exit.
But we can only imagine the noise this would have generated amongst the media here should it have been listed on SGX and fallen 63% from its IPO price before privatisation. This story is not dissimilar from Razer, which was listed in Hong Kong at HK$3.88, fell below HK$1.50, and was eventually delisted by CVC at HK$2.82.
Water will find its own level when speculation and liquidity make a market attractive to get a “high valuation” from time to time. Today’s listing aspirants look at Kuala Lumpur and India. But whether it is sustainable is anyone’s guess. The next time an emotive headline about losing our national jewels or another delisting flashes across our screens, perhaps we should keep calm and carry on, too.
Chew Sutat retired from Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange, and he was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore
