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Haha....difficult to long, dare not to short......stay in the middle then
Cheers!
Cheers!
Quite similar to " Love is blind and lovers cannot see!".....................Or choose not to see
Cheers!
Cheers!
May 4, 2008, 3.59 am (Singapore time)  |
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Weekly Market Report
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When all news is good news and bad news is ignored
By R SIVANITHY
SINGAPORE - If this has been a bear market rally, it will certainly go down in history as one of the strongest - since a closing low of 2,792 on March 17, the Straits Times Index (STI) has risen 444 points or 16 per cent to Friday's close of 3,236. The reason for the rise is that over the past 4-5 weeks, stock markets have found themselves in a unique position where all news is good news and bad news is ignored. The turning point thus far in the credit crunch saga was probably the Bear Stearns bailout in mid-March by the Federal Reserve and the liquidity injections the US central bank undertook, the effect of which has been to restore confidence (and possibly complacency) to markets. Since then US corporate earnings have actually been weak but since the figures were apparently not as bad as first expected, investors have rushed to buy. Fear of losing money it seems, has quickly been replaced by fear of being left out. Similarly, although profit warnings are on the rise in the local market and Q1 numbers reported so far not much to shout about, stocks have managed an amazing rebound, with the STI now only 6.6 per cent down for the year to date. Going forward, the questions that will be on everyone's minds of course, will be how much longer this can go on and what might Wall Street's reaction be if the slowdown is worse than expected and this starts to show in the earnings. Oil prices at close to US$120 a barrel will undoubtedly have a part to play with regards to their inflationary role and the eventual impact on interest rates. It's worth noting that ten years ago, oil was just US$10 a barrel while at the end of the 2003 Iraq invasion, the price was US$30. In April 30 newsletter, AMP Capital's chief economist and investment strategist, Shane Oliver said the long-term trend for oil prices is likely to remain up because growth in underlying demand is expected to continue outstripping supply. As a result, he expects the price to hit US$200 a barrel within the next five years which if it does occur, would surely be disastrous from a growth and inflation perspective. However, the present global slowdown should reduce near-term demand and afford some relief over the next six months, said Dr Oliver, and a pullback below US$85 is expected before the uptrend resumes. A second wild card will be the US federal funds rate which after last week's 25 points cut, now stands at 2 per cent. In an interview last week with Bloomberg, Templeton Asset Management fund manager Mark Mobius said he sees the Fed cutting the rate to 1 per cent. 'I don't think the fear is over. You're going to continue to get more pressure on them to lower and lower,' said Mr Mobius. For the time being though, Wall St does not expect another cut at the next meeting, scheduled for June 24-25. According to a Reuters survey 17 out of 19 major dealers said the Fed will leave rates unchanged at that meeting although only eight said they thought the Fed was finished with its rate cuts. The upshot of all this is that the local market will remain hostage to external forces, primarily Wall Street. Economic data will be scrutinised for clues as to whether the slowdown will be severe or mild, while patchy earnings reports will ensure a volatile few months ahead since it's not entirely clear if the full extent of the slowdown has yet to show in the numbers. For now though, the 'cannot lose' mentality that was evident in stock markets throughout 2004-2006 seems to have returned, albeit in slightly smaller measure and concentrated in the major blue chips and index stocks. The root of this complacency is yet another liquidity bubble the US Fed has inflated in its attempt to stave off an all-out collapse in an election year, one that funnily enough, it was party to in the first place. -- BT | |||||||
