Investment Outlook End 3rd Quarter 2008
November 25th, 2008 by ALVIN SOONG
US Federal Reserve chairman Ben Bernanke said financial markets are under severe stress and central bankers around the world are ready to do more to ease credit strains. He said steps that central banks have taken to ease liquidity strains and ensure short-term dollar funding around the world have led to improvements in credit market functioning, although he described those gains as ‘tentative’. ‘Financial markets remain under severe strain,’
However Mr Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco, said ‘Their (the banks’) actions to date still have not fully resolved the strains in the market. Just from the headlines I’ve seen, it suggests they are still looking to act in a concerted fashion and then we will just see where we go from here,’
With the widening credit crunch pushing the US economy towards recession, a US Commerce Department report yesterday showed shoppers were frightened over falling home prices, resulting in drop in retail sales excluding motor vehicles.
3rd Quarter shows a drop also for companies listed in Singapore Some major contributors to the slide included the banks, led by DBS Group Holdings, which saw net profit tumble 37.9per cent due to a sharp rise in allowances for bad loans - the group’s worst quarterly performance since the fourth quarter of 2005. Banks are expected to take a further hit as they may be forced to make more allowances for bad assets and make do with lower market-related income.
It is only the beginning of a slowdown and it would have been much worse if not for the many efforts companies made to mitigate costs in different industries.’
On a brighter note, there has been an easing of fuel-related costs, which may provide relief in overhead costs, especially in the transport sector, but the main concern is whether demand will slow down from here. However, an OCBC analyst noted and said, investors must adopt a longer term approach. ‘Equities still offer a good long-term bet, especially blue chips. Once the storm blows over, equities should start to recover.’
Sources from Edge, and Straits Times
