March 1, 2021 | By Siriporn Suwannakan | Column: See the World into Investment Treasures
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When the world changes It’s time to adjust your perspective on the “bubble”, especially during COVID-19. Stock markets around the world raised one-legged gains for more than 10 months, raising concerns that there could be a bubble. Come to a basic look that has changed Will find that the increased share price is reasonable
Amid the joy of investors who have made substantial profits from investing in foreign stocks since the post-COVID-19 crisis. The global stock markets rose one-legged for more than 10 months. Inevitably caused a concern that there would be a “Soap bubble” Because if you measure the distance from world stocks whose prices at the lowest point in March last year, up to now the price has risen by more than + 80% and has only adjusted to -7% (data as of 22g. Wed) more than that Prices for some funds focused on medical technology and innovation stocks more than doubled.
Just the asset price has increased that much Unable to determine whether a bubble or not. If you consider the definition of a “bubble” or “bubble” is the price of an asset. Increased rapidly As the market players flock to buy and there are chasing prices up. Until the price is higher than the true value, that is, the increased price does not have any fundamentals to support In addition, the bubble may coincide with investors who use loans to purchase assets. As was the case with technology stocks in 2000, the NASDAQ index fell from its peak of around 80%.
Take a look at the stock’s rise in this round. Will find that the environmental factors have changed greatly The rising share price has several supporting factors, including
- The current interest level is very low. Compared to 2000, the 10-year US Treasury yield is more than 6%, while the present is just 1.3%.The return on stocks is attractive by comparison. If the share price is measured using the Earnings yield gap (EYG) method or using the stock’s profit minus the 10-year government bond yield (where high values are considered attractive stocks), it is found that Stocks in many countries are still considered reasonably priced. For example, US stocks had EYG at 3.1% higher than the pre-crisis Dot-com, where EYG was negative.China stocks were about 3% more EYG than in the 2015 Chinese stock market bubble with only 1.5% EYG.
- The liquidity in the financial markets is high. As the largest central banks around the world, including the US, Europe and Japan, join forces to buy assets that their balance sheet sizes hit record highs.
- World economy year 2021 is likely to recover well. After the success of the vaccine By developed countries like the United States And the UK has already started vaccinating the first dose of around 20% of its population, and the gradual opening of economic activity would have a positive effect on commodity prices and corporate earnings growth.
When the world changes It’s time to adjust your perspective on the bubble. By considering the concerns of a sharp rise in share prices. Looking at the fundamentals that have changed from the above supporting factors, you will find thatThe increase in stock prices is reasonable. Or it could be called “Rational bubble”
Although the overall look more vivid But not all stocks in every country or industry have fundamentals to support rising prices. For example, Japanese stocks with fragile economic recovery. From a relatively delayed vaccination plan Including limited central bank financial easing capability, valuation level is expensive compared to the average and other countries. Or some companies in the US stock market That small investors flock to buy from word of mouth So at this time, stock selection (Stock Selection) is therefore very important.
Every investment has risks. Risk factors to be watched because of the potential negative for the stock market are: 1.Expectations for US inflation To increase from economic recovery Will increase bond yields But this will not affect the policy rate hike. and 2. Mutation of the COVID-19 virus That could affect the effectiveness of the vaccine and reverse the global economic recovery.
From the above Contributing factors to investing in stocks outweigh the risk factors. So we still have a positive view on investing in stocks. But requires more caution And not forgetting the important heart Is to diversify risks Both in terms of investment assets And time to invest
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