Dr. Chan: The US Bull Run Still Has Legs!

Donald Trump blew his own trumpet last September by declaring victory in the Sino-US trade war! He cited the US bull market, as opposed to the Chinese bear market, as the reason for the victory. As soon as the echoes of his trumpet subsided, the major US indices started a downward spiral after the US President took fresh steps to escalate the trade war by slapping a 25 percent tariff on all Chinese goods entering US territory starting from 1 January 2019.

Without a shadow of doubt, the increased tariff will hit the Chinese but it will invariably have a negative impact on the US economy as well. After scaling mountains and swimming across oceans, Trump and Xi finally met and decided on a 90-day truce so as to give both parties time to negotiate terms. Just recently, Trump kept repeating that talks have been ongoing and remarked that positive outcomes are likely. The US stock market has rallied because of these positive comments, which clearly demonstrates that trade wars are bad for all parties.

The Longest US Bull Run Looks Set To Continue

Trump now understands that an end to the trade war is a requisite to the US stock market continuing its fine run. As a result, I am confident that there will be more good news coming out from this front as highlighted by the US’ willingness, in a piece of rumour on 18 January, to cancel part of the tariffs imposed on China goods. This led to the US indices surging to a level which is now only 8.3 percent away from the all-time high. I am optimistic that the US indices will continue to rise to highs!

Tencent Holdings Set To Wipe Out Bears

Trump’s change of stance is good news for the Hong Kong stock market, which has been in a correction mode for a big part of 2018. The announcement by the Chinese central bank to cut interest rate and banks’ reserve requirement ratio sparked off a rally on 4 January 2019, changing the mindsets of investors in Hong Kong.

I noticed that the bears have been coming into the market at every rally by purchasing put warrants. For the big boys to kill the bears, they will have to push up the share price of Tencent Holdings (HK: 0700) for the index to rise.