FinTips August

Et tu, Germany?! If you are an avid reader, love history and historical plays, you might have linked the earlier sentence to the famous Shakespearean Quote “Et tu, Brute?!” It is the Latin phrase that was used to poetically represent the last words of the Roman dictator Julius Caesar to his best friend Marcus Brutus at the moment of his murder by stabbing. It can be translated into English as “You too, Brutus?!” and has been used to signify the utmost betrayal. So now the question… Why did I replace Brutus with Germany? Well, let’s go into the details! But before that (where are my manners?!), I hope that you had a wonderful Aidil Fitri and enjoyed the holidays that followed it.

As the global economic scene has been unveiling a distorted tapestry, by parts, for the past 3 years, the end of the tunnel is still not quite in sight; At least for the US and the EU (European Union). When we shift our focus to the EU, we see that the region was affected quite badly during the economic crash of the US due to the debt mortgage issue. But that’s another story for another time. Back to the EU… When Greece had to default on its bonds and technically declare bankruptcy, the countries in the EU chipped in to grease up the sticky situation. But the problem was that, the countries that helped Greece grease up, got a little too much grease onto themselves leaving them to slip and slide one by one. The domino effect started with Spain, then Portugal, Italy and now has come to Germany. The pumping of funds into Greece was to not just aid the country but to yield some returns to these countries. But when this once prominent star collapsed onto itself and became a black hole (where no amount of money is enough… and by the way, that is how a black hole is formed), these countries that went to its aid are being sucked into the vortex, slowly but surely. If the pattern continues, chances are that France might be the next target to be pulled into the vortex as they too have invested a large amount towards Greece’s recovery… But I COULD be wrong on that (hopefully).

How is that going to affect us? Well, if you have invested in Asia / ASEAN, you’re relatively safe. If you have invested in the EU… let’s just say that there is a long way to go till you see the light at the end of the tunnel. Now, before we start jumping for joy, caution has to be applied even when investing in the Asian and ASEAN region. Countries that are safe would include countries such as Malaysia, Indonesia, Thailand, Philippines and India as these countries have taken steps towards internalizing their markets.  Some countries that may not be performing well in the coming months would include countries like Singapore, China and UAE as they still have a high invested interest with the US and the EU. 

So for those who have invested during the market crash, your gains are already being noticed and should be pleasing in no time. For those who are still waiting… you may choose to invest now as there are signs of stability in the economy. If you still choose to wait, you would be choosing to marginalize your returns. As most funds have just declared their dividends (which range from 10% - 26% for a year), the funds are low in price, urging investors to pump in their investments. To put it into perspective, the Growth Fund which was at RM 0.4729/unit is now at RM 0.4130/unit. Commodity prices have been on the upward trend and are expected to be so for quite a while. The market, and many experts had predicted a sudden BOOM in commodity pricing and so, since the market was ready for it, it didn’t happen. Somehow, that seems to be the current market pattern. I guess it (the market) is putting the phrase “Expect the Unexpected” into perspective. But honestly, how do you expect something when you don’t know what to expect for? It is like saying “I’m seeing the thing that I can’t see”