This quarter (1Q 2017) has been a pretty quiet quarter, as I weigh the effect of Trump election and the trade strategy he is going to implement. By and large, I feel the plan Trump Office has for USA will be good to USA companies in the short term, but bad for the country as a whole in the long term.
To implement his election campaign promise "To Make America Great Again", he has vowed to force companies who have outsourced jobs overseas to bring these jobs back to USA. Should companies refuse to comply to his will, he threatened them with additional taxes should they intend to import the products back to USA domestic market to sell. To entice the USA companies further, he plans to cut corporate taxes (Good to companies in the short term as it boost their immediate profits), but the high cost of setting up shop in USA, and the high wages of USA workers, I feel these cost will ultimately be pass on to the consumers a few year down the road once the companies outstanding profits are starting to be compromised. For the gap in income left behind by the tax cut, Trump office intend to cover up by cutting the foreign aid budget and the environmental agency budget (sic). By blasting trade pact as unfair to USA, he promised to review these trade pacts again and famously pull out of TPP which Obama Office has taken years to build up. In my opinion, these acts are a form of USA industry protectionism and just make USA companies anti-competitive. I seriously wonder, how can they survive long in this Global Market where cost usually dictates the consumer demands. I personally feel 2017 might be the peak we see of the USA market, before a major correction in 2018 or 2019 as people start seeing the weakness and flaws in Trump's Office policy.
For Singapore Market, it seems to finally wake up from its long slumber in Q1 as most stocks started to track USA market in going northward. For me, I have already positioned myself long ago, hence, I only managed to do 2 transactions in the whole of Q1.
Transaction 1: Bought in a final batch of GLP stocks to prepare for its privatization offers.
As of GLP latest update on 30-Mar-17, shortlisted parties have commenced due diligence on the Company, which I believe they should put in a formal proposal at the end of April, with a final bid price in May. According to articles, there are 3 shortlisted parties, which are a management-backed consortium that includes Chinese investment firms Hillhouse Capital Management and Hopu Investment Management, a Warburg Pincus-led investor group, and the Blackstone Group.
Personally, I feel the Hopu Investment Group and the Warburg Pincus Group are the more serious bidders, and the final bid price should come between 25% - 40% premium to the current GLP NAV, which translates to $3.37 - $3.80. Lets see if I am right.
Transaction 2: Short Term: Bought in a batch of Noble Group stocks on possible SinoChem taking a stake in the company.
Should this happen, it will be a jolt of confidence to the Noble Group and good recurring profits in the future as Noble help SinoChem manage their supply chain. This is meant to be a short term play. Should the news becomes a reality, Noble Group price will rise (Depends on the final price SinoChem is buying in the stake). Taking reference to a similar case in 2009 where CIC also bought in a stake, Noble Group price rises about 30% compared to 1 month before the news was released. I meant to sell off immediately once the news is confirmed.
That is all I have for Q1 update. See ya all in Q2. Chaos
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