7 November 2020 ( 9.57 Malaysian time). I am pondering what is next – how should I plan for the rest of 2020 (a basically written-off year) and may be start thinking about 2021. Biden is nearing a victory, to be followed by long-drawn litigation / recount unless the Orange guy decides to concede. We had our Budget 2021 presented in the parliament, nothing really interesting. CMCO to be extended in multiple states other than Klang Valley / Sabah, would this be a preclude to a full MCO soon?
So what is next, at least for the next 6 months?
On election night, i managed to offload 50% of my option positions (mainly positive delta positions), resulting in significantly tilted negative-beta delta weighted portfolio. Since then, I have re-balanced the portfolio to about -2 negative delta-beta weighted portfolio.
Since it is NOT a blue wave (assuming the Senate is controlled by the GOP), we would anticipate that the release of the stimulus will be questionable in terms of quantum and timing. Other implications are as follows:
(1) Capping on stock market rally (recent rally could be a relief rally due to blue wave not happening)
(2) Lack of stimulus – recovery is questionable. No growth, no inflation and yield will remain subdue or decrease.
(3) Would dollar appreciate? Lack of stimulus – better for dollar?
(4) Potentially bad on emerging economies – depends on recovery / growth of US (if lack of stimulus, then how?)
(5) Gold – continued uncertainty (value as safe haven) and lack of growth / no inflation – gold should do pretty ok
(6) O&G – no blue wave, then OK
(7) No blue wave, tech stocks would do ok – won’t subject to risk of de-mantling
(8) A new administration that will seriously tackle the corona pandemic. However, do not believe that corona can be contained immediately. More closures / lockdowns will be bad for the growth of the economy. Tech stocks may do well in continued lockdown.
(9) With Biden in charge, could we see a better relationship with China or other economies?
What would I do now?
Long Gold (GLD)
Long Tech Stocks (QQQ)
Long China (FXI)
Long Japan (FXY / EWJ)
May be an alternative hedge to US as safe haven. New administration under Suga.
Someone did ask me whether can buy Malaysian bank stocks? I told the person to look at it after Q4 2020 in order to have a better assessment of the overall financial positions of the Malaysian banking sectors. The recently tabled Malaysian budget doesn’t excite me, except to tell me that the debt-to-GDP will exceed 60% and the ceiling may be raised further in the future. Will be very concerned with the Ringgit.
I recently took some LONG positions in the following stocks
Magni-Tech (Malaysia) – good fundamentals / OEM for NIKE
Hyphens Pharma (Singapore) – mainly for its growth prospect / pharma play
Currently, looking at some plantation stocks (palm oil).
So what will be the key risks at this moment?
- Protracted legal battles for the white house
- Delay in vaccine / increasing Covid cases / further lockdowns
- Geopolitical issues (global)
Disclaimer: This is NOT an investment / trading advice or endorsement. Please refer to the general disclaimer of this blog.