Market Radar 27. March 2023


Is Asia now running away from Europe, while the S&P 500 is crawling sideways?

Since mid-August 2022, the ETF on the S&P 500 (SPY) has been moving in a sideways range between 420 and 360 US dollars. Last Friday, it closed at $395.75, slightly above the middle of this range.

Since the medium-term trend in the S&P 500 is neither long nor short, but sideways, long-term to medium-term oriented investors should perhaps imitate the stillholders: earn money by passing time and price thresholds are not exceeded or undercut.

In addition to day traders, stillholders can probably boast the highest returns achieved for the past seven months.

After the turmoil we’ve seen in the banking sector since March 9, it’s a bit surprising that the long-term picture of the S&P 500 has “crept” into such a volatile but actually lethargic forward movement.

Three bank failures after bank runs: Can it get worse?
If three bank failures in such a short time did not cause the S&P 500 to crash downwards, then many stock market participants are now wondering which horror scenarios could develop stronger crash potentials than the fears of bank failures and bank runs. More is not really possible, right?

Since a bank failure follows a bank run and not the other way around, the Fed under Jerome Powell and the US Finance Ministry under Janet Yellen now know exactly when and where to intervene. Both have communicated this clearly in the past trading week: “Our interventions were necessary to protect the broad US banking system,” Yellen said in a speech to the American Bankers Association in Washington. At the same time, the US Treasury Secretary and former US Federal Reserve Chairman promised further support and stressed that the government would take focused measures if necessary to prevent a run on current deposits to withdraw customer funds.

So are there more opportunities up than down at the index level because the worst is behind us?
An intensification of risks for the banking sector cannot be ruled out. Nowadays, normal bank customers without financial knowledge can quickly find out via the Internet that money market funds and even brokers pay more interest on deposits than traditional credit institutions such as regional banks or savings banks. However, this only leads to outflows, not to a bank run.

A possible collapse of individual REITs Stocks that have not diversified their business enough towards office and commercial real estate are probably attributed more individual risk than wildfire risk. I had reported about it in the market radar of March 23, 2023. The S&P 500 should probably hardly be disturbed by this “bogeyman”.

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What do we see under the radar of the major stock indices?

The market radar currently shows me that Asian countries are accumulating, while some capital has recently been withdrawn from European countries.

The ETF for Indonesia (EIDO) rose by 4% in the past trading week. The ETFs for Malaysia (EWM), Thailand (THD) and Vietnam (VNM) also recorded weekly gains and were upgraded from the daily stamp “wait or speculate on sell-off” to “under observation” during the trading week. Now bottoming out for these regions is becoming more and more likely.

We are currently observing higher highs in the charts of country ETFs for Singapore (EWS) and Taiwan (EWT). Both ETFs also receive the daily stamp “buy or top-up”, so that traders can act trend-following.
Let’s take a quick look at Singapore:

When scanning for stocks that show relative strength compared to other Singapore-based companies, I noticed Maexon Solar Technologies (MAXN; Market capitalization: approximately $1 billion). The company offers solar cells under the SunPower brand.

On March 7, the company announced a higher loss and also lower sales than expected by the market. Nevertheless, the stock was able to rise by over 40% on earnings day. This could have been triggered by the fact that the expected sales for the first quarter of 2023 were revised upwards. The phenomenon of buy-on-bad news is sometimes a good way to participate in a turnaround story at an early stage.

After announcing the ultimately disappointing quarterly figures, Maexon Solar Technologies shares are trading in a range between $28 and $22. It should be noted that the trading volume of the ADRs listed on the Nasdaq has been consistently higher since the announcement of the earnings than in previous months.