Monday, February 7, 2011

Rabbit could be just as tempestuous as Tiger

FENGSHUI experts agree that Tiger years are meant to be volatile ones for financial markets, and the one that just roared to an end last Wednesday certainly lived up to that tradition.

And although the Rabbit will usher in a bit of calm to the markets, these experts warn that some of the terrible Tiger's volatile tendencies will carry over into the new year. 'For this year, inflation fears, the pace of the US recovery, and European debt issues will continue to contribute to the volatility,' said vice-president of Sias Research, Mr Roger Tan.

'We may see higher volatility numbers as governments announce inflation control measures and as economic data comes into the market.'

Brokerage CLSA, on the other hand, says that the Year of the Rabbit will bring 'plenty of luck and material gain for investors'. In its annual Feng Shui Index report, it wrote, 'it will be a good year for oil and gas, technology, telecoms, Internet and utilities, but an unexciting time for the earth-related property sector'.

Mr Tan noted that while the local stock market did experience a bumpy ride last year, the standard deviation level was not as high as in previous Tiger years.

Still, the Year of the Tiger saw the benchmark Straits Times Index (STI) hitting several peaks and troughs as it tracked major global events.

The lengthening euro zone debt crisis, for example, caused the STI to fall to 2,650.61 in May, but it soared to a high of 3,313.61 in November when the United States Federal Reserve announced a second round of 'quantitative easing' measures, known as QE2, that was aimed at injecting some liquidity - and buoyancy - into the sagging US economy.

The market cheer was soon erased, however, by the outbreak of unrest in the Middle East, which led to a 1.55 per cent dip in the STI on Monday last week.

In the Tiger Year, rising palm oil and food prices boosted shares of resource and commodity firms such as Olam, Wilmar and Golden Agri-Resources, which helped the FTSE ST Consumer Goods Index to leap 9 per cent.

The FTSE ST Oil and Gas Index, which looks set to outperform the overall market this year, began its climb last year, rising more than 17 per cent in the Tiger Year, and beating the benchmark STI index's 16 per cent rise by a whisker.

And the FTSE ST Real Estate Holding and Development Index saw its rise slow to about 12 per cent as the residential property sector sentiment was dampened by a slew of cooling measures implemented by the Government.

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