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Expect 'false recoveries'
By Alvin Foo
The crisis is so severe and multi-faceted that the real economy may bottom out the same time or just before global equities do. -- ST PHOTO: NEO XIAOBIN
THE crisis is so severe and multi-faceted that the real economy may bottom out the same time or just before global equities do, unlike in past downturns when the market recovered six months ahead, said a market strategist here on Tuesday.
CMC Markets chief market strategist Ashraf Laidi told a media briefing on Tuesday: 'This time it's different. The economic weakness has reached out to people's pockets from various channels - price of houses, price of stocks, debts to repay. All these will force them to cut spending, beyond just discretionary spending.'
Typically, a stock market turnaround is seen as an advance indicator of an economic recovery.
But Mr Laidi noted that in 2002, the stock market bottomed out after the economy reached a low in the United States.
Thus, financial markets will be in for several 'false recoveries.'
He predicted that stock markets will retest last year's lows again by July, noting: 'We're in a bear market rally, a dead cat bounce ... we're going to see the November lows again.'
He noted that market rebounds in past crises were usually limited to between 25 and 27 per cent, and never went beyond 29 per cent.
'Macroeconomically, things are still in bad shape,' he said.
Global equitites may see a sustained recovery only in the second half of next year.
Expect 'false recoveries'
By Alvin Foo
The crisis is so severe and multi-faceted that the real economy may bottom out the same time or just before global equities do. -- ST PHOTO: NEO XIAOBIN
THE crisis is so severe and multi-faceted that the real economy may bottom out the same time or just before global equities do, unlike in past downturns when the market recovered six months ahead, said a market strategist here on Tuesday.
CMC Markets chief market strategist Ashraf Laidi told a media briefing on Tuesday: 'This time it's different. The economic weakness has reached out to people's pockets from various channels - price of houses, price of stocks, debts to repay. All these will force them to cut spending, beyond just discretionary spending.'
Typically, a stock market turnaround is seen as an advance indicator of an economic recovery.
But Mr Laidi noted that in 2002, the stock market bottomed out after the economy reached a low in the United States.
Thus, financial markets will be in for several 'false recoveries.'
He predicted that stock markets will retest last year's lows again by July, noting: 'We're in a bear market rally, a dead cat bounce ... we're going to see the November lows again.'
He noted that market rebounds in past crises were usually limited to between 25 and 27 per cent, and never went beyond 29 per cent.
'Macroeconomically, things are still in bad shape,' he said.
Global equitites may see a sustained recovery only in the second half of next year.
