80% Chance for Econ to Recover Woh!

[makapaaa]

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>April 23, 2009
STOCK MARKET: DIVE IN?
</TR><!-- headline one : start --><TR>Bet on Asian equities to lead revival: Analyst
</TR><!-- headline one : end --><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Gabriel Chen
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Mr Aaron Gurwitz, Barclay Wealth's head of global investment strategy. -- PHOTO: BARCLAYS
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->INVESTORS with little or no exposure to Asian stocks should now put their money to work, according to the head of global investment strategy at Barclays Wealth.
New York-based Aaron Gurwitz said yesterday that there is an 80 per cent chance that the global economy could recover by the end of this year, with Asia at the forefront of the revival.
'We want to take risks in Asia,' said Mr Gurwitz, who has recommended that investors overweight equities in the Asia-Pacific ex-Japan region for their portfolios.
'If we get to the end of this year, and if all the things that all the governments and central banks have done - bringing interest rates to zero, quantitative easing and massive stimulus packages - don't get their economies growing again, the psychological impact will be devastating,' he said.
Mr Gurwitz, who was speaking at a media briefing here, tipped the timing and robustness of the recovery on factors like the savings rate of United States consumers in the light of the credit crunch, as well as the success of the International Monetary Fund's bailout of eastern European banks.
But the global recovery will also depend on whether China raises its consumption levels.
'One of the top things...is China's success in shifting from an export-oriented economic development strategy to a more balanced domestic demand- oriented growth strategy,' Mr Gurwitz said.
He said the economic outlook for China is improving, with business sentiment sharply getting better and bank lending increasing.
At the same time, he acknowledged that it is hard for China to stimulate consumption without a sound social safety net.
But even after taking that into consideration, Mr Gurwitz remained adamant that the country's savings rate is too high.
'The social safety in China is not as strong as that in Sweden, but a 40 per cent savings rate is awfully high, and if we could get that down to 35 or 30, it'll still be a very high savings rate,' he added.
Mr Gurwitz said that Asian stocks are at 'attractive valuations' compared with global markets, which he believed had probably seen the worst of the carnage.
'The chances (of markets) going below the old lows are not high,' he said.
Mr Gurwitz's comments come at a time when equity markets have enjoyed a six-week rally while a growing chorus of investors are tipping that the turnaround has finally started.
Just last month, Templeton Asset Management's executive chairman Mark Mobius said the bull market rally in emerging markets has just begun. 'I have a feeling we're at the bottom and now we're building a base for the next bull market,' Dr Mobius told Bloomberg News.

 

[makapaaa]

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>April 23, 2009
STOCK MARKET: DIVE IN?
</TR><!-- headline one : start --><TR>No global recovery yet but stocks attractive now
</TR><!-- headline one : end --><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Fiona Chan
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->A SUSTAINABLE recovery in the global economy is unlikely until at least 2012, but investors looking for long-term returns should consider buying stocks now.
That is the advice of Societe Generale Asset Management's head of strategy and economic research, Ms Michala Marcussen, who believes equity values have reached an attractive level.
According to her analysis of cyclically adjusted price-earnings (P/E) ratios - one of the ways analysts measure stock values - prices of United States shares have fallen enough to reach an 'interesting entry point' for long-term investors.
'They were cheaper in the inflationary years of the 1970s, but they are attractively valued now,' she said in a media briefing on the world economic outlook yesterday.
US shares have an average P/E ratio of 7, almost half that in 2006 and a third of that in 1999-2000, she added.
Lower P/E ratios mean that equities are cheaper compared to their intrinsic values, measured according to a company's earnings. In the 1970s, the average P/E ratio of US equities was under 5.
Other investment opportunities worth looking at in anticipation of a future recovery include some commodities, especially gold, bonds and currencies that have been badly battered such as the Korean won and the Mexican peso, said Ms Marcussen.
Investors, though, should not expect a quick recovery. Global economic growth is likely to remain tepid next year and in 2011, and the best-case scenario is for the world economy to start picking up again in 2012, she added.
Recent news and analyst reports have focused on the 'green shoots' emerging from the wintery economic gloom of the past few months, but Ms Marcussen believes a 'slow thaw' is more plausible.
'There is a sense that the worst is over,' she said, pointing to three reasons for this: the running down of inventories, the stimulus packages in various countries starting to take effect, and new indications that the banking sector crisis is starting to be resolved.
But there are still obstacles to a real recovery, she added. Credit channels are still not working properly, US households remain deeply in debt, and banks have written off only about a third of their expected US$2.8 trillion (S$4.22 trillion) in write-downs. Rather than a V-shaped or U-shaped recovery, Ms Marcussen expects a 'square-root' shape: after the steep plunge down, a small recovery now, and then a plateau of flat growth.