Shares slump but analysts say downtrend is temporary

by Jonathan Peeris
04:47 AM Jun 17, 2011
SINGAPORE - Shares in Singapore slumped yesterday, in line with losses for the rest of Asia and Europe, with sentiment hurt by mounting debt problems in the euro-zone and more signs of slowing growth in the United States and China.

The benchmark Straits Times Index ended down 34.7 points, or 1.14 per cent, at 3,020.13, after falling to its lowest intra-day level since late March, as worries over weak US data and Greece's spiralling debt troubles kept investors away.

Elsewhere in Asia, China's Shanghai Composite shed 1.5 per cent, Hong Kong's Hang Seng lost 1.8 per cent, while Japan's Nikkei-225 fell 1.7 per cent.

Late afternoon in Europe, London's FTSE was down 1.5 per cent while Germany's DAX declined 1 per cent.

But while analysts predicted more weakness in the near term, they were of the view that the downtrend would not last.

Mr Daryl Liew, head of portfolio management at Swiss private wealth management firm Reyl, said he was not surprised by the fall because markets had been correcting for a while already.

Mr Liew said: "The problems in Europe obviously have been the catalyst overnight but I think in general people are concerned over the potential ending of the second round of quantitative easing in the US as well as the situation in China with the tightening measures.

"I think it's basically a combination of all these three main reasons that has caused people to basically take risk off the table."

Mr Wong Sui Jau, general manager of fund distributor Fundsupermart, agreed, saying he wasn't too worried because the core fundamentals of companies remained strong.

"At this point in time, a lot of earnings are near record levels, if not already close to record levels," said Mr Wong.

"For example, in the US, overall earnings are going to hit record levels by the end of this year, yet valuations are not anywhere near the kind of levels to suggest this type of very, very strong earnings."

He added that the downside would likely be limited and that investors should take a long-term approach.

"In fact, for investors who are able to be patient enough to hold out this period, the potential rebound can be quite strong," said Mr Wong.

For the Singapore market, both analysts were of the view that it would start to see a rebound in the second half of the year and end 2011 higher.

Source/转贴/Extract/: TODAYonline
Publish date:17/06/11