Investors need to watch out for possible market corrections of at least 10%

Investors need to watch out for possible market corrections of at least 10%
By Ryan Huang/ Jonathan Peeris, Channel NewsAsia,
Posted: 14 December 2009 2054 hrs


SINGAPORE: Online financial services firm CMC Markets said investors hoping to enter the stock markets before year-end should be wary of a possible correction of about 10 per cent.

CMC said recent rallies have run ahead of fundamentals. And there are also concerns about when central banks will withdraw stimulus measures from the global financial system.

Stock markets may have rallied and shown signs of stabilising in recent months, but CMC Markets believes there should be caution going into 2010.

For one, it said, the recent stock market rallies have been fuelled by the weakness of the US dollar and Japanese yen. And when these currencies stabilise, the stock rally may falter.

Then there is the question of how markets will react to central banks eventually pulling back the massive stimulus for the global economy.

CMC believes there are significant headwinds ahead for markets.

Ashraf Laidi, chief market strategist, CMC Markets, said: "First of all, the fallout from the Dubai story is really not over yet and just starting. The question really depends upon the extent to which these various entities that are part of the Dubai Holdings umbrella may be forced sell some of their UK and US-based property."

CMC said other problem areas include the current credit tensions inside some Eurozone countries like Greece and Spain. There are also signs of weakness in the commercial real estate sector in the UK and the US.

Mr Ashraf Laidi added: "I think currencies like the Malaysian ringgit and the Singapore dollar could be boosted by a concrete improvement in interest rates.

"I think the real estate sector in these regions probably cannot be described to be in a bubble as others can. I think that services and activity in financial services here and the demand is really taking a life of its own."

CMC also sees a bright spark in gold as a long-term investment. It said while gold prices may dip in the next two quarters, the yellow metal may hit a high of US$1,500 an ounce in the second half of next year. - CNA/vm

http://www.channelnewsasia.com/stories/corporatenews/view/1024760/1/.html