Illustration 1: Bird flu onset in Jan 2003 … Hang Seng & Straits Times Index plunge 15% to March-April 2003
Asianmacro remembered the dark days of SARS / bird flu onset circa January 2003. That was when there was a real sense of doom that is palpable in the air, especially in Singapore where NOBODY ever voluntarily wears a mask over one’s nose and mouth when he/she has a cold or flu (unlike in Japan or Hong Kong) … you can actually see people in that period in 2003 (if you are lucky to spot a few brave ones out doing grocery shopping!) wearing them.
From Illustration 1, both Hang Seng and Strait Times index plunged about 15% within the next 2 months. There is a new strain of bird flu with some deaths reported in China http://uk.reuters.com/article/2013/04/05/uk-birdflu-idUKBRE93402H20130405. Hang Seng is currently off by 600 points (approx -3%) while Straits Times is holding up very well and off only -0.10%. Looks like there must be a lot of ‘safe haven’ flows buying into Singapore stocks holding them up according to all the brokers!
Maybe it is an opportune time to remind ourselves, firstly, Singapore is not as good a safe haven as before both from an economic, political and geographical stand point. Secondly, when it comes to bird flu, it is different from bringing your money over from Cyprus, Luxembourg or any other tax-haven of dubious origins to Singapore as the bird flu virus do not differentiate between Hong Kong or Singapore. In fact, Singapore as a major transportation hub and also with a great number of its residents doing business in China and its companies depending on China, it is just as exposed to Hong Kong to such an exogenous event.
As the 2003 SARS / Bird Flu impact on Singapore stocks has proven before … this time, it shall not be any different. Anybody who claimed otherwise had better remember the last episode. as Singapore stocks is far too high up to justify its insulation from what that is panning out whether this bird flu is going to get worse or better, you can be sure that it is not going to get any better first and China always play down negative events!
Short SIMSCI April futures at current 372 level to 360 region as this represent a good risk-reward proposition now! *This is either a hedge against your underlying cash stocks or outright bet on a decline.
*Asianmacro is a beach bum managing his own wealth. Besides deciding what to have for lunch (or hitting the gym sometimes), he is mostly found listening to loud music while trading and investing for himself. While every care has been taken in preparing the information in and/or materials, such information and materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials. The opinions expressed do not constitute investment advice and independent advice should be sought where appropriate. In no event will Asianmacro be liable to you for any direct or indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials attached herewith. Asianmacro may already have or intend to have a trading or investment position in the financial instruments or products referred to in this communication. This is not intended as an offer or solicitation for the purchase or sale of any financial instrument and Asianmacro may also have interests different from or adverse to your interests.