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| No prolonged downward trend, say fund managers and analyst |
| Written by Celine Tan | |||
| Tuesday, 03 November 2009 16:03 | |||
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Industry players call this reversal temporary and necessary. “There aren’t enough fundamentals supporting the current overall market valuation of 20 to 21 times the market P/E,” said Kenanga Investment Bank Bhd head of research Yeonzon Yeow. “The market is likely to reach a valuation of 16 times the P/E after the correction, which would be around 1,150 to 1,200 level.” Those interviewed said that a minor correction would last till mid-November. “This is largely because investment sentiments are usually good towards the end of the year when window dressing takes place,” said TA Investment Management Bhd chief investment officer Choo Swee Kee. “The slight pause from the upward trend encourages more transactions, or else the stock market stays stale.” He described the current correction in the local market as the third one this year, after those in March and June/July. The correction is in line with regional stock exchanges, noted Fortress Capital Asset Management (M) Sdn Bhd CEO Thomas Yong. Worries over the strength of the US recovery have led regional stock markets to also slide over the last one week. The Hang Seng Composite Index has contracted by 5.68%, following a high of 3,104.45 on Oct 23, Singapore’s Straits Times Index fell 3.1%, following a high of 2,716.62 on Oct 26 and the Shanghai Composite Index has contracted 4.79%, after a high of 3,109.56 on Oct 26. However, those interviewed said there is no need to panic but to buy selectively on dips. “Last year’s investment outflow hasn’t fully returned,” said Yong. “Thus, this correction presents opportunities for those that have been holding back from investing. The corporate results in the second quarter of the year remain good. There is no tangible reason that the market will experience prolonged downward movement.” “If you intend to invest, start picking stocks when others are taking profit,” said Choo.
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