Market Review and Trends
The G20 conference
By DanielXX  •  April 4, 2009
[caption id="attachment_2152" align="alignright" width="192" caption="Photo by Incase Designs"]Photo by [/caption] And so, after half a year of waiting, finally the G20 meeting convenes this coming week. Will it be another NATO (No Action Talk Only) meeting ie. an anticlimax yet again? I tend to think that this will come to be seen as a key event in the annuals of financial history, because of a few factors: (1) it has been six months in the making, which gives various participants the time to think things over and lobby for support; (2) the economic collapses following the Lehman bankruptcy have confounded even the most pessimistic estimates, hence conferring the political impetus for drastic action; (3)long-standing economic imbalances have long been recognised and this is the best opportunity, amidst a crisis emanating from such imbalances, to "upside the downside" (to quote a famous saying from our of our most articulate local ministers). I believe there will be a few key issues on the agenda as described below, together with the market implications: (1) Coordination on fiscal spending by all countries. Related to this is the issue of protectionism. For example, countries like Singapore are dead scared of too much fiscal spending because of the fear that much of this money will leak overseas due to our high exposure to global trade. Even mighty Germany doesn't want to end up subsidising the exports of EU member countries. Without global coordination along the lines that each country pulls its own weight in fiscal stimulus such that countries will not end up accusing each other of benefiting from the other's fiscal stimulus, a classic prisoner's dilemma situation could develop where all parties, in trying to protect their own self-interests, end up all losers. If this coordination works, I would expect protectionism fears to ease and trade-related companies to benefit, particularly commodities (which are needed for infrastructure construction). (2) Greater regulation of the global financial system. This is being championed by the Europeans (my suspicion is that they're pushing this as the top agenda item because they cannot afford to pay for massive fiscal spending like the Americans). Already we're seeing the imminent clampdowns on tax havens and bank secrecy. Most likely hedge funds, with their massive clout unsupervised by any agencies, will get the next round of scrutiny. Greater transparency of OTC markets involving all kinds of derivatives that have caused great uncertainty will be next. The implication: the financial industry will never be the same again. Therefore, rid your portfolios of all banks. The new index heavyweights will be utilities, back to the good old days. Another word of advice: Singapore should really beware of changes in this arena, because we have positioned ourselves so much for the financial industry, in particular wealth management, in recent years. Monumental changes in banking secrecy and tax haven laws will affect our fortunes greatly. Read more...
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By DanielXX
DanielXX operates a series of popular stock blogs through which he channels his passion for stock investing. He has been sharing his experiences and views on the Singapore stock market for the past year on these blogs, and is best known for his HotStocksNot site where he makes regular calls against certain hot stocks on the Singapore market. DanielXX considers himself a medium-term investor and focuses on fundamental analysis in his stock-picking approach

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