Trade Radar | Q3 2023 Market Outlook with Loui: Uncovering Gems In Economic Turbulence
Q3 2023 Market Outlook with Loui, M+ Online Head of Research.
Is “Recovery still intact?” (Loui asked the audience…)
Given that China reopened its international borders in Jan-2023, why hasn't it really boosted global economic activities?
Delayed recovery perhaps falling in 2H23. Loui’s view is leaning towards a “delayed recovery” as after the borders are reopened, the Chinese tourists could be heading back for the Chinese New Year break in 1Q and not much international traveling activities and spending outside of China. Even luxury shoppers are buying items domestically.
Some other discretionary spending like travel, cruise and aviation are seeing some improvements recently, Carnival Corp (CCL), Royal Caribbean Cruises Ltd (RCL), and United Airlines Holdings Inc (UAL) are some of the names trending positively with earnings guidance tilted towards 2H23 recovery, which suggests that delayed earnings could be genuinely falling in the 2H23 this year.
Besides, Loui was providing some insights on some of the on-going global concerns.
1) The US banking crisis - could be averted at this juncture, but it may haunt the market when the Bank Term Funding Program ends in Mar-2024.
2) Inflationary pressure - US CPI has been on the declining trend and may normalise to 2.0% YoY going forward.
3) Heightened interest rate environment - Unlikely to have a rate cut in 2023.
Maintain hawkishness. Loui maintained the view that the Fed will need to stay hawkish but need not to increase the rate higher as CPI is declining, but also can’t let the guards down as it may accidentally provide a wrong tone for the market to inflate the asset prices again.
Back on the local front, 3 factors that he will be looking at:
1) Malaysia GDP is still expanding - suggesting economic growth is intact.
2) Malaysia CPI is gradually declining - which is healthy for the overall population.
3) Upcoming state elections - will be concluding on the 12th of Aug.
BNM has kept the interest rate unchanged at 3.00% and may put in another 25 basis points in 2H23.
For a global economic review, Loui stated that the overall job market is resilient in the US and the unemployment rate is at record low. However, the Fed’s tone is still in the Quantitative Tightening tone, which changes the narrative of the “free money era” in the past decade into rational investment in reality.
Strategy to deploy. Given this scenario of elevated interest rate of ~5%, lower liquidity narrative, year of innovation and higher efficiency, investors may shift their investment requirements by selecting only highly profitable companies accompanied by solid balance sheets such as low gearing or high net cash companies.
Portfolio Review
For Malaysia, he has provided investment ideas over the past 1 year, garnering decent profits of more than 20%, while the US and HK 2Q23 portfolio gained 9.2% (SPX: 8.5%), 3.4% (HSI: -6.7%), respectively. The systematic approach of the strategy is providing decent results at this juncture.
In 3Q23, these are some of the stock picks for the US:
| Ticker | Name | Sector | Market Cap (USD 'bn) |
| MSFT | Microsoft | Software | 2513.1 |
| GOOGL | Alphabet Inc-A | Interactive Media & Services | 1526.5 |
| NVDA | Nvidia | Semiconductor | 1047.6 |
| META | Meta Platforms | Interactive Media & Services | 733.0 |
| V | Visa | Financial Services | 499.9 |
| JPM | JPMorgan Chase & Co. | Banks | 428.4 |
| MA | Mastercard | Financial Services | 373.3 |
| AVGO | Broadcom | Semiconductor | 361.7 |
| ORCL | Oracle CORP | Software | 318 |
| ASML | ASML Holding N.V. | Semiconductor | 295.9 |
Meanwhile, for Hong Kong, these are the selection of stocks:
| Ticker | Name | Sector | Market Cap (HKD 'bn) |
| 0857 | PetroChina-H | Oil, Gas & Consumable Fuels | 1488.7 |
| 0005 | HSBC Holdings PL | Banks | 1233.3 |
| 9999 | NetEase | Entertainment | 507.6 |
| 2015 | LI Auto | Automobiles | 300.4 |
| 0763 | ZTE-H | Communications Equipment | 217 |
| 0902 | Huaneng Power-H | Power and Electricity | 135.1 |
| 2338 | Weichai Power-H | Machinery | 118 |
| 1071 | Huadian Power-H | Power and Electricity | 70.6 |
| 9896 | Miniso Group-A | Retail | 43.7 |
For Malaysia’s stock ideas, investors may use the following list.
You may also use this link to replay on the live stream
More about Loui:
Loui Low leads a team of analysts to perform equity and economic research and to provide investment advisory services to the organization's sales team, fund manager and retail fraternity. He has more than 10 years of experience in the stockbroking industry.
He graduated with a Bachelor of Science in Statistics from University of Malaya. He also holds an STA Diploma and is a member of the Society of Technical Analysts (MSTA) United Kingdom.
More about the Trade Radar:
Trade Radar is a weekly-updated section, featuring Loui's latest insights into market trends and hot topics. Traders may find some trading inspiration from Loui's views.
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