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Lie low till next quarter, Credit Suisse tells investors

THE Singapore stock market will continue its wild swings for the next few months – so keep clear.

That was the health warning from Credit Suisse’s head of Asian equity research, Ms Fan Cheuk Wan, who believes the bourse will start to stabilise and head north in the second quarter.

She estimates that regional markets will end the year 21 per cent higher than where they are now.

She said Asian markets are at an advanced stage of the bull market, where the easy money has been made and where valuations are ‘no longer cheap’.

Regional markets have been hammered by non-stop bad news about the sub-prime crisis and United States recession worries over the past few days.

This ‘perfect storm’ is the reason why investors fled the market in a panic, resulting in the volatility that has roiled regional bourses, including Singapore’s, said Ms Fan.

The good news, though, is that ‘we are now approaching the trough of the market correction’, with at most a ‘single-digit per cent downside for the region’, she said.

Ms Fan expects the US subprime crisis and other problems to persist into the second quarter, however, which means ‘no imminent upside’, and so no real incentives for investors to enter the market now.

In fact, investors should batten down the hatches and sit tight until the second quarter, which she believes will offer ‘better opportunities’ for bargain-hunting.

By then, the full effects of the sub-prime crisis will be clear and the US Federal Reserve will also have outlined its plans for the faltering American economy.

Further cuts in US interest rates – inevitable, says Ms Fan – will boost global equity markets, including Singapore’s.

Investors will also have a clearer idea if a US recession is imminent, she said.

Good picks then, she said, would be ‘market leaders in their respective sectors’ with ‘good fundamentals in their domestic markets’.

Ms Fan said companies such as Keppel Corp, DBS Group Holdings and CapitaMall Trust should give investors a ‘good upside potential’.

Other picks include firms in ‘environmental protection and alternative energy’, such as Hyflux, or food producers.

Ms Fan also warned investors off export-oriented counters, such as semiconductor and technology stocks, especially now.


Source: The Straits Times 18 Jan 08

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