Fwd: Fw: market view - Fraser

[Speculatist]

Fowarded FYI please. The view below did not represent my opinion



Wall Street may signal world stock markets to undergo a more substantial
pullback in coming months


As we enter the more unpredictable August-November period, which in the
past had seen momentous events resulting in sharp market falls, investors
are likely to be more cautious going forward.

After all, the ST Index has risen to such record heights without much of a
correction since mid-2006, if the week-long end-Feb/early March 11.6%
plunge can be considered an abberation as a swift recovery to new highs
took place in just after a month.

Thus fewer investors can be expected to ride out the next downturn even
though record shows the market rallying forcefully after pullbacks or
corrections lasting at most several weeks.

This is to be expected as most bullish factors are already well-known but
the unknown unknowns as the PM put it recently are still lurking in the
background.

So far market uncertainties have taken a back seat as interest rates remain
benign, US housing woes and sub-prime mortgage problems appear largely in
check, oil price rise seems orderly and the geo-political front is
generally quiet.

On the other hand bullish earnings expectations and upgrades continue
unabated on top of higher economic growth forecasts with the latest
economists saying Singapore can grow at near 8% pace for next several
years.

Moreover, attractive dividend payouts continue to prevent investors from
selling blue chips with several of them such as SIA and SingTel due to make
payments next month. Conglomerates, property giant and banks too will be
announcing interim dividends soon and this will continue to underpin the
market.

In the light of all these bullish factors and mildly bearish leads such as
the Dow's overnight fall, it may be hard to paint a scenario where a
correction of 15 to 20% taking place in coming months.

But it is also unlikely that the market can just repeat its series of minor
short-lived 3-5% pullbacks, which had been taking place in the past few
months.

An 8-12% pullback occurring sometime between end-August and ending around
mid-November is a more likely scenario prior to a year-end/new year rally.
The correction may be more severe if nasty surprises, which the market had
been spared since the Sept 11 2001 attacks, rear their ugly heads again.

Before 2001, the late August to mid-November period had been notorious for
such events as the Oct 19 1987 Black Monday, Wall Street's mini-crash in
1989, the Russian coup, the Iraqi invasion of Kuwait in 1990 and the
worsening of the Asian crisis of 1997-98.

In the event the Dow finds it hard to convincingly clear 14,000 and instead
goes into a new minor downtrend in coming weeks, the STI may not be able to
easily move to 3700-3750 during the reporting season and amid the National
Day celebrations.

If it continues to struggle within 3600-3670 for an extended period till
around mid-August, investors are likely to sell once blue chips go
ex-dividend.

We may to adjust the broad targeted 3450-3750 trading range for coming
months once it becomes clearer that the index cannot sustain its rise the
latest 3688 peak and beyond the borders of 3700 as August progresses.

A 10% pullback from 3700 can take the STI back to 3330, near its first
major peak of 3316 this year.

This fall is unlikely to come suddenly but should be spread out over
several weeks. Technical rebounds should take place when psychological
support around 3600, 3500 and 3400 are tested as the market undergoes its
much needed breather in September to mid-November to prepare for a
year-end/new year rally to break 3700-3750 and attempt new heights.













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