Part of the article, How to make money in 2009 which was published in the Sunday Times on the 28 December 2008.
Mr Gabriel Yap, senior dealing director with DMG & Partners Securities
What was the best and worst thing that happened to you financially this year ?
Best: My decision to liquidate practically all my trading portfolio when the market saw two price peaks in October2007 and broke its trend line after the second one - a strong indication that it was time to sell - in December 2007.
Worst: Despite liquidating almost all of my trading portfolio, I had only begun to trim my investment portfolio in August 2008 when the banks were reporting huge losses despite management’s assurances of a turnaround.
How do you see 2009 panning out?
Equities are on course for their largest losses since the Great Depression and 2009 could exhibit the classic post-boom and bust sideways trading pattern in the first half of the year. That is when the upside is capped by consistent bad news from the economy, earnings and asset markets, but the downside is protected by already excessive pessimism and historically low valuations.
We will likely see a decline in global credit spreads which have already happened, bottoming of companies earnings and a stop in the decline of United States housing prices.
What is one piece of financial advice you would give to a person looking ahead in 2009?
Based on fundamentals, the 60 to 70per cent collapse in global equities since October2007 has brought valuations to 40per cent below replacement values of their underlying assets. Thus, the downside, if any, from the current levels will be minimal.
Look for the market's daily trading volume to rise. At the peak we were trading 9.4 billion shares a day but right now we are seeing less than a billion a day. If you see volume moving up to three or four billion, that's a very good indication that some of the smart money is coming back.
Would your answer be different for a)a single, working person b)a married couple with school-going children c)a retiree?
a) You should be looking to increase your risk profile in equities.
b) Same, but less weightage in stocks highly sensitive to economic factors.
c) Invest or trade with only your spare cash. Keep the bulk of your portfolio in the steady income generation class.
Is it a good time to buy a car or property?
Car and certificate of entitlement (COE) prices move in tandem with the economy, so it is not too timely to do so if it is not necessary.
Based on experience, property will be the last asset class to recover this time round, in view of the looming supply.
As with the past great equity bottoms of the Singapore market in 1985, 1998 and 2002, equities will bottom first before the economy, then will come companies' earnings and lastly, the property market.
In this article, there were also other interviews being conducted but I find that the viewpoint being shared by Gabriel Yap is very informative and I am holding the same views as him too. To summarize the important things that he said,
1. Upside is capped by consistent bad news from the economy, earnings and asset markets, but the downside is protected by already excessive pessimism and historically low valuations.
2. A good indication that the smart money is back can be indicated by the market volume.
3. Equities will bottom first before the economy, then will come companies' earnings and lastly, the property market.
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