Market Commentary: Suez Canal shipping disruption | Chinese economy rebound

Watch Freddy Lim, StashAway Co-founder and Chief Investment Officer, and Philipp Muedder, Head of Financial Planning, discuss the latest global events and their potential impact on the markets and on our investment portfolios.

In this episode:

1. How the Suez Canal blockage will impact the price of goods [2:19]
2. China allowing some COVID-19 relief spending programs to expire [3:59]
3. Will there be any impact to StashAway’s asset allocations across both US and Chinese markets in the medium to long term? [5:56]

FULL TRANSCRIPT

Philipp | 00:01 

Hello and welcome everyone, to another weekly market commentary from StashAway. With us, of course, our Chief Investment Officer, Freddy Lim. Hey Freddy, how are you doing this week?

Freddy | 00:12 

I'm doing well. I'm just not so sure about the Suez Canal this morning.

Philipp | 00:16

Yes, and we do want to get to the Suez Canal. Before we do though, Freddy, I do want to give a little shout out about what happened last week or started before the last weekend, and we want to just make sure that everyone is aware of the situation. There was a scam notice. So over the last week, a group of scammers claiming to be from StashAway have been contacting people at random over WhatsApp. So the perpetrators have been impersonating StashAway on WhatsApp and mass inviting individuals randomly into a WhatsApp group. So you can always check that it's us on WhatsApp by looking out for WhatsApp's green badge, there's a green icon badge next to our contact name - StashAway. You'll also see a notification stating that this chat is with the official business account of StashAway and tap to learn more. So those are ways to find out, the green badge icon, a notification indicating the account belongs to us, and it's our verified WhatsApp number and I want to mention the WhatsApp number here as well. So it's +65 98770801. So we will only contact you through this account, no other accounts. If you see any other number, please send us a message on email or our real WhatsApp account so that we can follow up with this. And if you think you've been contacted by any scammer, again, we encourage you to block the number - report it to WhatsApp. And not share any personal information with them at all. So we've also filed a police report. So all of those things are on the way. But anyway, again, thank you, everyone, for making us aware of this situation.

Freddy | 01:51 

I would also emphasise that, look, when in doubt, always defer to best practices, call our official numbers and ask. And [00:02:00] also, just so you know, any properly regulated entities would never ask for money in WhatsApp. You always go through the proper banking channel, proper payments channel. So when in doubt, don't pay, call in, ask questions. Just be a bit more careful with your own money.

Philipp | 02:19 

Last but not least, we do get to your Suez Canal. This obviously happened in the last 24 hours, almost 2 days now by the time you might be listening to this. Give us a little bit of an overview of what's happening there, and why it's actually important?

Freddy | 02:37 

I mean, you wouldn't expect something like this to be important, but it's logistics. And the Suez Canal was built a long, long time ago. It's not so big and ships are getting bigger. So when a ship broke down, 10 tankers behind it were stuck in the Suez Canal and they're still trying to clear it. And those ships hold 13 million barrels of oil or gas equivalent. So, that's swinging the oil market by up and down 6% to 7% point within the day. So just when you didn't expect such a thing would be important, but it's sort of important enough for the oil markets.

Philipp | 03:21 

Yeah, no, it is. And I think I read somewhere it's actually 10% of all world ship traffic on a daily basis, right? So it's actually quite an important trade route. And so we'll be monitoring it. But again -

Freddy | 03:36 

They will need to clear it within the next day or two. If you can't a lot of tankers will start trying to reroute through the Cape of Good Hope. That's a long way to get to Asia and you will see increases in prices and energy and so on, hitting your purse if that happens. But again, these are short-term factors. It's not a permanent thing.

Philipp | 03:59 

Yes. [00:04:00] The short-term factors and I'm sure the captain is probably the one least happy about all of this, that it happened to him. But Freddy, Suez Canal is one I think, this week as well, we saw a lot of declines in terms of the Chinese equities market as well. Any update on that? What's going on there and what is your interpretation of that?

Freddy | 04:25 

I mean, to make it brief, I think all markets have gone up a lot and that's what happens, when nothing is cheap, right? And when that happens, investors would start becoming more sensitive to anything. And so what happened in China was that they sort of allowed some of the COVID-19 relief spending programs to expire and that sort of made people rethink like, the US is doing more stimulus and China is not. And some of you may think it's bad news for the stock market, but I question that because - if you don't need it, why do it? The Chinese economy is one of the leading ones in the world right now in terms of the rebound. Its mobility has really gone back to pre-COVID levels, right? Everything in China is really, really sort of much more normalised than in the US and otherwise. And having more stimulus is not necessarily a good thing, right? It cheapens your currency, it dilutes the value of paper money. Some of you may be concerned with the US Dollars. So, there's a lot of give and take with every action taken. I want to just caution investors from over-reading this sort of news too much. Think medium to long term. And the medium- to long-term story is, if I ask you this, would you in the medium to long term have zero investment in China? It wouldn't happen, right?

Philipp | 05:56 

Very good point. Very good point, Freddy. For people, it's a good question [00:06:00] they should ask themselves, exactly. So, this goes actually hand-in-hand with the first question from our listeners from last week. So Ryan Tum is asking, "Given the divergent economic policies between the US and China, will this have any impact on StashAway's allocation across both markets in the medium to long term?".

Freddy | 06:19 

Because we're medium and long term, these things don't affect our asset allocations. Also, it's not human-driven, not by myself, it's all by the numbers and data. And so to qualify, last year, we picked up the signal that the Dollar depreciation is going to be a big thing and it happened. So we moved into China rather than the US. So, Chinese tech rather than US tech. So that has a multifaceted angle to it. China, of course, a long-term story, right? It's going to continue to build up its own ecosystems in tech. And it doesn't print nearly as much money as the US as we just mentioned. That's good news in terms of currency. The depreciation story is more applicable to the US Dollars, right? So all these things are the stuff that drives our decision. It's very systematic, it's very data-driven. So because it's medium and long term, these things don't matter, we let the data speak for itself.

Philipp | 07:20 

Data is key. Next question Freddy, Jason Lim is asking, "If bond yields are up, meaning prices are down. Isn't that a great opportunity to buy bonds? Another way to see is money outflows from bond markets will probably reach equity markets in the near term. Isn't this also good for investors?".

Freddy | 07:38

Again, that's a market timing question. And if you can do it consistently? Well, by all means, if that's your view, feel free to do it. But in the long term, it's going to be very difficult to keep making calls like that, right? I would ask investors instead to think back since 2020, if you have concentrated your investments in the stock markets [00:08:00] and everything is going well so far, maybe it's time to think about broadening the breadth and depth of your portfolios. And if that's the case, the bond market gives you a cheaper entry level now to buy some protective assets just in case something surprises you in the stock market. That's one way to look at it. So I think this ultimately goes back to your risk level.

Philipp | 08:25

Ok, thank you, Freddy, for all the questions answered today. If you want your questions answered, please feel free to always drop them down into the comments section or email them to us at support@stashaway.com. So Freddy and I can pick them up over the next couple of weeks. With that being said, we do have some very, very interesting webinars coming up. And the first one is actually for all of our regions. Singapore, MENA, Malaysia. We have a joint webinar with BlackRock. It's called BlackRock x StashAway: ESG Uncovered - Can Sustainability Drive Returns? That's on Thursday, the 1st of April. It's Singapore or Malaysia Time, 7pm. And for MENA region listeners, it's around 3pm your time. So please feel free to sign up for this. The links and the show notes below, as well as on our website and on Eventbrite. And for our Singapore audience, we have our ongoing series called Bringing StashAway to Your Workplace. The next one for that is on Wednesday, the 31st of March, 6pm. Again, links are in the show notes below, as well as on our website, Eventbrite, Facebook and anywhere else you can find StashAway. With that being said, hey Freddy, thank you again for being here. Looking forward to next week. Until then, have a great week, everyone. See you shortly. Bye-bye.