Many investors are beliving that this rally is here to stay. Several that I spoke to, are forecasting STI target of 1,900 or 2,000 by 31 Dec 2008. Isn\'t it strange that a couple of weeks ago, we are talking about how the US automakers failed bailout will wipe out 1 million jobs and create a massive US recession. Today, the investors seem to have forgotten about that. In my opinion, this rally is not sustainable. The buying is fumed by news flow and substantial short covering and possible some window dressing by the funds. Come 31 December 2008, the funds will be shorting once again and I believe STI will stumble once again back to 1,400. This is my personal opinion and not a recommendation. Good luck to ALL and a Merry X\'mas and Happy 2009 ahead.
SGX Market Commentary Published December 22, 2008 STOCKS Possible window-dressing aside, it\'s not yet time to be bullish By R SIVANITHY SENIOR CORRESPONDENT LAST week, analysts issued a number of reports that should be of great relevance and interest to stockmarket investors. The first was Morgan Stanley\'s Dec 18 report on Singapore property titled \'Too Early To Turn Positive\' which, coincidentally, was issued on the same day that Macquarie Research released a report titled \'Not Yet\', saying the same of Hongkong Land. Although both targeted different areas and discussed different topics, the message was essentially the same - there is no visibility of any recovery yet and, in fact, the areas in question (Singapore property firms and Hong Kong office rentals) are still in the throes of a downturn. Although the Straits Times Index and several other stocks will probably enjoy some year-end window-dressing this week - or call it yet another bear rally if you like - we agree with these two houses that it is not yet time to turn positive on anything. In fact, the next 3-6 months will see companies report worsening earnings and analysts have to slash their forecasts yet again, given that existing estimates are in all likelihood too optimistic. The bulls, of course, will point to the massive reflation efforts being undertaken by the US Federal Reserve, Treasury and central banks around the world. Which brings us round to the next report, a Dec 18 Merrill Lynch (ML) Economics paper aptly titled \'There is no such thing as a free lunch\', in which it pondered the question that if this is the worst global downturn since the Great Depression, then why don\'t all central banks cut interest rates to zero - and governments send us each a cheque for a million dollars? As ML stated, there are limits and side-effects to stimulus. \'These limits come in three forms, in our view. If you stimulate too much a) bond yields rise, or b) the currency plunges, or c) inflation rises. Central banks have tried to attack the first problem by promising to quantitatively ease, that is, to purchase government bonds should their yields rise too high. This temporarily shifts the problem to the currency. The UK was the first country to go down this path ... in recent days, it seemed that the US might be going down this path as well.\' The US investment house concluded that markets and policymakers in 2009 will encounter these limits and side-effects, and whether they like it or not, there will be global rebalancing to contend with. This is not to say that there will not be money-making opportunities. As punters would have noticed, there are plenty of bear-trap rallies to enjoy, the latest being last week\'s push on property stocks, simply because of stimulus measures announced by the Chinese authorities. As some houses have noted, these don\'t benefit Singapore developers in any meaningful way but, hey, since when have punters needed firm reasons to indulge in a bit of speculative buying? Still, we\'d agree with Morgan Stanley which said there is a 70-80 per cent chance that the stocks involved (CapitaLand and Keppel Land) will plunge in the coming days because the run-up was not justified in the first place. Finally, it\'s interesting to read what New York University professor Nouriel Roubini, who a year ago correctly predicted the sub-prime crisis, has to say about 2009: \'We are in the middle of a very severe recession that\'s going to continue through all of 2009 - the worst US recession in the past 50 years. It\'s the bursting of a huge leveraged-up credit bubble. There\'s no going back, and there is no bottom to it ... Things are going to be awful for everyday people. US GDP growth is going to be negative through the end of 2009. And the recovery in 2010 and 2011, if there is one, is going to be so weak - with a growth rate of 1-1.5 per cent - that it\'s going to feel like a recession. I see the unemployment rate peaking at around 9 per cent by 2010.\' He added: \'I would stay away from risky assets. I would stay away from the stock market ... I would stay in cash or cash-like instruments such as short-term or longer-term government bonds ... I wish I could be more cheerful, but I was right a year ago, and I think I\'ll be right this year too.\'
Yep, not a good time to buy. Not until the Index (and most counters) have risen 20-30% from their trough levels. That\'s when people start worrying about missing the boat and start piling in.... As to when this scenario will take place, once again no one can predict it; though everyone tries their best to. As the song goes: \"Hit me with your best shot, FIRE AWAY !\"
Just bought shorts in most of the STI component stocks. I believe, DBS will definately see a drop in share price following its ill-timed right issue. Very few funds would want to invest now, especially in financial sector... DBS thought it has the backing of the Ang Mo houses and the Temasek, hence it yaya-papaya just go ahead with its fund raising exercise..... Good luck to DBS. Capitaland. What was the rally for? Given that this Company is desperately trying to deleverage, by selling its assets, one has to wonder about whether the rally is short lived. SembMarine. Wonder how much more monies they got to cough out for their derivatives attempt?
Hi MacGyver, You\'re right on spot for the December rally. I had the same fear too but at the same time I wasn\'t too sure whether the boat has left. With the benefit of hindsight now we know that those bulls who got a seat all drown like the titanic. Well the boat has arrive again and now no one is interested. I probably boarded a little early and the \'falling knifes\' are shaving my portfolio on a daily basis since the end of Jan till today. Luckily I\'m still 40% in cash and still averaging down (another nice word for..%%&&*## should have waited a little longer). Cheap gets cheaper and earnings is just about halfway through with more bad news to come. Even worse will be the next earnings season coming this May...well maybe not depending on the forward outlook. Well my company\'s business has never been so bad...err (semiconductor) in it\'s 15 year history especially for the month of Jan. We\'re seeing a nice pickup in activity in North Asia but SEA is still horrible. Who knows this boat may be another titanic but we\'re very close to reaching valuations (some already below) at Net Cash or Net Current Asset. Some stocks in particular like C&G which had continuously reported horrible earnings with no improvement in sight has held on off it\'s 52 week low and even with the other Fibre stocks taking a huge beating (Li Heng and Fibrechem) it held on. Maybe all the punters are gone or that it has reach such low valuations liquidating the company will be much more rewarding for the shareholders compared to the current price. A lot of S-Chips are already at that level. Of course if the management is prudent and honest (which I cannot say for all China companies), it is impossible to lose much more as some companies can buy up all the remaining float and go private at a huge discount to NTA. Am I a bull or bear?? Both or none to be exact but apparently no one is interested anymore and maybe that makes me a bull (albeit with a lot of fear). Even those bears are afraid of shorting as valuations are already so ridiculous no one is able to make a case for shorting. Take China Zaino which is in consumer discretionary segment and the market leader in backpacks. It is already at 52 week low and at NCA level (or below)...any shorts out there??? Another anomaly I notice is that Shanghai Stocks has risen quite a bit off their lows but S Chips here has suffered huge!!
Hi Gary, I believe nobody has a crystal to foresee what will happen. One thing is for sure, China will probably be the only growth market in the world in 2009. I have confidence that when the PRC governmen says \"We will give you the 8% growth, they mean it.\" Knowing which PRC companies to buy for this sustainable growth will be key. As for why Shanghai Index rally and Singapore S-chips did not, a very simple answer. The poor corporate governance of these S-chips. Investors don\'t trust the S-chips here. Take a look at China Hongxing... RMB 1 billion given to their distributors to boost sales. Will we see this money again? God knows..
