For a complete understanding of the investment market, we need to perform 4 levels of analysis:
L1 = individual stock, L2 = sector / industry, L3 = country / region, L4 = world.
These 4 levels will interact with one another to generate the complex stock market responses. From the past 5 years of regional stock indices (see Figure) in Singapore, China, Hong Kong and USA, we could observe the following important trends and correlations, which could help us in making the right positions for the next 1 year:
- In the earlier stage, due to different political economy policies, US and China have been diverged in the trends, China has been bearish after the tightening of cash supply since 2009 while US has been consistently bullish after QE 1,2,3 with near-zero interest rate.
- In the past 1 year, supported by strong recover of economy, US could still maintain the …