Bad Start to the Year

It's the first week of the year, yet there doesn't seem to be much worth celebrating (unless you're waiting for the market to fall before going in). Just today, the STI fell 74 points and some blue chips among them such as Keppel, fell by 6.5%, all in one day. What's happening?

(Image source: wikipedia.org)

Yuan Devaluation

The sudden fall for today seems to be the effect of another yuan devaluation. China lowered the midpoint rate of the yuan by 0.5 percent compared to the day before on 6 Jan, which sparked a selloff in the Chinese stock market, reducing the value of the CSI 300 index by 5%, which triggered a 15-minute trading halt and continued to fall further when trading resumed.

Poor Chinese Data

China's Caixin manufacturing Purchasing Managers' Index (PMI) fell to 48.2, while official data showed the index at 49.7, both numbers indicating a contraction. The slowing of growth in China seems to be having a large impact on the region and commodity prices as well, with Brent crude oil at below $35

What should we be doing?

It doesn't seem to be the end of the bad news so I'll be holding off the buying for a while. But, but...... blue chips such as Keppel and Sembcorp Ind are selling at attractive valuations, at $5.82 and $2.76 respectively. These companies are likely to survive through turbulent times, just as they have others, and being able to get them at a discount may promise healthy returns in the future, so I would continue watching and seeing how these things turn out and hopefully catch the opportunities before they are too late

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