Riding the Cycle

Thursday, 2 Oct 2008 | 6:11 PM ET

The equity markets have been nothing short of turbulent over the last couple of weeks. The Dow saw a massive 778 point plunge on September 29 -- its biggest one-day point-drop on record, after the U.S. financial rescue package was rejected.

Even though the U.S. Senate has now passed the bailout bill, investors in Asia are still cautious. Many remain unconvinced that their equity investments are safe are are closely watching the passage of the bailout bill in the House of Representatives.

"The best thing, usually, is to do nothing," quips Naomi Fink, Japan strategist at Bank of Tokyo Mitsubishi on CNBC Asia Pacific's "Protect Your Wealth" segment.

But if you look hard enough, experts like Fink say they do see some pockets of opportunities -- like in defensives, for example.

"There are certain sectors that perform very well in counter-cyclical conditions -- utilities being one of these, [like] telecoms in Japan."

Bailout - Just The Beginning
Even if financial markets stabilize due to some form of bailout plan, do not expect the U.S. economy to experience a sudden rebound and avert recession, as the U.S. still has scale down on consumption further before a cyclical recovery is in the horizon, observes Naomi Fink, Japan strategist at Bank of Tokyo Mitsubishi. She discusses the U.S. economic outlook with CNBC's Martin Soong and Amanda Drury, as well as David Chon, founding partner at Atlas Capital Management.

"Cyclicals offer tremendous value from the short side," notes David Chon, founding partner at Atlas Capital Management. He agrees with Fink that if one stays close to high-dividend, yield-strong cash flow stocks on the long side, investors could have an exposure-free portfolio that could generate decent returns.

And dare you say the "F" word -- yes, financials? Fink believes that even Japanese banks could be fairly safe bets despite the current financial crisis, as some of these banks have cash surpluses.

"Protect Your Wealth" also turned its focus to safe currency investments, with Paul Bednarczyk, senior currency strategist of Forecast, advising investors to take on short euro-U.S. dollar positions.

Short Euro-Dollar
Shorting euro-dollar is probably one of the safest bets in the currency markets right now, Paul Bednarczyk, senior currency strategist at Forecast believes.

But Bednarczyk stresses that when playing the market in such volatile times, investors need to be very disciplined and should watch their stops because prices move very quickly. "The good thing about foreign exchange is that there is always a price. The trouble is that price can move very quickly against you. So I think, be conservative -- don't go in too deeply," Bednarczyk advises.

Playing the conservative card and being less greedy is probably the safest advice an investor can get in today's market turbulence.

Chon sums this up well before the end of his interview. "One prudent thing to do is be less greedy. I think being less greedy -- preserving your capital so when the opportunity does come, it can [then] be deployed. It's very hard to lose money and take on additional risk as you're losing money. And that's what investors are faced with today."

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