Keeping our cool in bad economic turmoil
October 16th, 2008 by ALVIN SOONG
We should our head cool in today’s pessimistic economic turmoil
Shares tanked all week long, driven by panic-selling everywhere. Given the constant bombardment of bad news, one can’t help but feel emotionally drained. With newspaper pictures showing cliched scenes of floor traders holding their heads in agony, it just hyped up further the FEAR that is gripping the whole world.
However, this is not the time to lose one’s head. The stategy now is to buy-and-hold. One can learn from history, whether if market would to go down further or to dollar cost buying in now. This is like a parallel in the current turmoil and the Asian financial crisis a decade ago.
In the 1990s, Many Asian companies grew rich riding on the cheap credit by taking the low US dollar loans to finance their operations. However, they were undone by the weak economic management of their governments, which left their economies vulnerable to concerted attacks by hedge funds. The good news is that there will be opportunities to acquire quality stocks at bargain basement prices. But be prepared for the long haul.
The financial crisis may be coming to a head, but the economic downturn that is sure to follow has not arrived.
SINGAPORE now is in a technical recession after the economy slipped into negative territory for the second quarter in a row, dragged down by a slump in exports and a weak property market. Possible job unemployment may looms the market next year, signifying a complete real recession.
A TECHNICAL recession is defined as two consecutive quarters in which the economy has shrunk compared to the previous quarter. (The size of the economy is measured in terms of the total value of goods and services produced in a country, also known as its gross domestic product, or GDP).
With the deepening global financial crisis, demand for exports has dropped, hitting Singapore’s key manufacturing sector, which shrank by 11.5 per cent in the third quarter amid a protracted slump in pharmaceuticals and electronic output. Construction and services held nastier surprises. Construction, which had been powering along at double-digit growth, abruptly halved to lodge single-digit expansion for the first time since 2006.
The services sector held no bright spots either, cooling to lower growth as financial market activities slowed while the subdued property market weighed down on the real estate services industry.
Figures extracted from Straits TImes and The Edge, summarised in detail.
