The flow of negative news in the US and Singapore continues…..this is not unexpected but tells us that the market has probably some way to its bottom…..as we need to at least some signs of the negative news flow either being expected or at least plateauing out before a bottom can be formed.
The strong rally in the US markets the day before could not be sustained with the Dow opening sharply lower by close to -200 points before a late rally saw it move back into the black before losing ground in the final minutes of trading. (see intra-day chart below). This kind of volatilty is not helpful and shows a high degree of nervousnessy by investors, another possibility is that stock prices have collapsed such that price movements have a bigger impact on the indices.
The key feature in the US market is that the Government will stress tests it 19 biggest banks – to be completed by mid April and set for them minimum capital requirements which they have to achieve within six months through private equity of Government funding. At least the wheels are in motion – and given the tightness of the capital and credit markets, my guess is that the Government will have to come in and provide the capital, ie semi nationalisation.
On the local front, our Q4-2008 GDP numbers were just released this morning. No major surprises, with GDP growth in Q4 down 4.2% yoy and 16.4% qoq. No major surprises here, although I expect that our GDP growth will now likely trend toward the lower end of the Government’s range of -5% – dont forget some global investment banks (if they are still around) are looking for as much as a 10% contraction in the worst case.
So more reason to stay sidelined for medium to long term investors and let the market edge down in the coming months.
Source: NRA Capital – Kevin’s Blog