mr funny
07-02-11, 18:02
http://www.businesstimes.com.sg/sub/companies/story/0,4574,424611-1296763140,00.html?
Published February 3, 2011
STOCKS
Wall St and the West are now the safe havens
By R SIVANITHY
SENIOR CORRESPONDENT
IT'S not often that you think of Wall Street as a 'safe haven', a description once reserved for markets like Singapore's, but clearly as the emerging markets (EM) theme continues to lose favour, money seeking a suitable parking space is flowing back to the West and into the US.
Not that this should come as a surprise - this column has several times in the past three weeks suggested the likelihood that EMs might sag because the theme had been overdone and overplayed.
Add to that the sudden turmoil in Egypt and Tunisia, the emergence of inflation worries in EMs coupled with the perception that government reaction is usually to too slow and too late, and you have an excuse to exit EMs - at least for now.
As for Wall Street as a preferred destination, this makes perfect sense since the central bank has consistently signalled its determination to print money and hand it to the market if there is a crash. Known as the 'Bernanke Put', named after the current Fed chairman, such a guarantee means that buying Wall Street has been a no-brainer for more than a year now.
Yesterday's session brought with it more short-covering following Monday's 50-point loss, the Straits Times Index this time managing a 26.38 points rise to 3,211.12. For the week the index lost about 10 points while year-to-date the STI is about 21 points in the black.
Morgan Stanley has been at the forefront of the EM inflation curve for some weeks now and in its Global Emerging Markets weekly said headline CPI and PPI inflation in EMs are both now over 5 per cent and rising on a GDP-weighted basis.
It said its economists now project a more rapid increase in nominal and real interest rates than previously. There is a clear inverse relationship between EM real rates and the level of EM equities.
'As liquidity conditions start to tighten, so interbank rates are spiking ahead of further policy action. This is pressuring equities in most major markets other than Russia: a process which is reminiscent of the impact of the sudden tightening in stance in early 2008. We continue to highlight our view that absolute and relative returns from Asia/EM equities are unlikely to be positive in H1,' said MS.
Perhaps more relevant for the bulls is that the US investment bank also reported that at its recent Global Insight year ahead event in London, the percentage of clients naming Asia/EM equities as their top pick for performance in 2011 was just 19 per cent versus over 86 per cent at a similar client event in September 2010.
Among the companies to release results and conduct an analyst briefing during the week was Singapore Airlines, whose shares fell 30 cents over the week to $14.74.
DMG & Partners said after the briefing there was no new guidance from SIA's management other than that heightening competition from Middle Eastern carriers has led to forward bookings levelling off.
'With SIA's net cash of more than $5 billion, questions remain over how this treasure chest can be put to better use. While we remain upbeat on SIA's yield momentum, albeit at a slower pace, our key concern is fuel cost, for which we have raised our FY12 price assumption to US$110/barrel. As such, we trim our earnings by 7.4 per cent for FY12 (FY11 unchanged), which cuts our TP on SIA to $17.20 (from $18.50), although our BUY recommendation stays,' said DMG.
Published February 3, 2011
STOCKS
Wall St and the West are now the safe havens
By R SIVANITHY
SENIOR CORRESPONDENT
IT'S not often that you think of Wall Street as a 'safe haven', a description once reserved for markets like Singapore's, but clearly as the emerging markets (EM) theme continues to lose favour, money seeking a suitable parking space is flowing back to the West and into the US.
Not that this should come as a surprise - this column has several times in the past three weeks suggested the likelihood that EMs might sag because the theme had been overdone and overplayed.
Add to that the sudden turmoil in Egypt and Tunisia, the emergence of inflation worries in EMs coupled with the perception that government reaction is usually to too slow and too late, and you have an excuse to exit EMs - at least for now.
As for Wall Street as a preferred destination, this makes perfect sense since the central bank has consistently signalled its determination to print money and hand it to the market if there is a crash. Known as the 'Bernanke Put', named after the current Fed chairman, such a guarantee means that buying Wall Street has been a no-brainer for more than a year now.
Yesterday's session brought with it more short-covering following Monday's 50-point loss, the Straits Times Index this time managing a 26.38 points rise to 3,211.12. For the week the index lost about 10 points while year-to-date the STI is about 21 points in the black.
Morgan Stanley has been at the forefront of the EM inflation curve for some weeks now and in its Global Emerging Markets weekly said headline CPI and PPI inflation in EMs are both now over 5 per cent and rising on a GDP-weighted basis.
It said its economists now project a more rapid increase in nominal and real interest rates than previously. There is a clear inverse relationship between EM real rates and the level of EM equities.
'As liquidity conditions start to tighten, so interbank rates are spiking ahead of further policy action. This is pressuring equities in most major markets other than Russia: a process which is reminiscent of the impact of the sudden tightening in stance in early 2008. We continue to highlight our view that absolute and relative returns from Asia/EM equities are unlikely to be positive in H1,' said MS.
Perhaps more relevant for the bulls is that the US investment bank also reported that at its recent Global Insight year ahead event in London, the percentage of clients naming Asia/EM equities as their top pick for performance in 2011 was just 19 per cent versus over 86 per cent at a similar client event in September 2010.
Among the companies to release results and conduct an analyst briefing during the week was Singapore Airlines, whose shares fell 30 cents over the week to $14.74.
DMG & Partners said after the briefing there was no new guidance from SIA's management other than that heightening competition from Middle Eastern carriers has led to forward bookings levelling off.
'With SIA's net cash of more than $5 billion, questions remain over how this treasure chest can be put to better use. While we remain upbeat on SIA's yield momentum, albeit at a slower pace, our key concern is fuel cost, for which we have raised our FY12 price assumption to US$110/barrel. As such, we trim our earnings by 7.4 per cent for FY12 (FY11 unchanged), which cuts our TP on SIA to $17.20 (from $18.50), although our BUY recommendation stays,' said DMG.