This recession is perhaps the most “prosperous” recession we have ever seen, thanks to all the liquidity injected into the global monetary system and our government’s pump priming of the local economy with infrastructure projects, jobs credit and low interest rates.
The STI index closed today at a 10-month high of 2,533.43.
And URA reported a better-than-estimated fall in private home prices of 4.7% instead of the 5.9% announced earlier.
Now, I’m not sure if property prices will continue to fall in the next quarter.
* the graph shows relationship between STI graph and URA index graph (the laggard).
But at least one prominent economist has warned of a double dip recession with the second leg coming in late 2010.
Will we see both stocks and property recover the way they did in 1998Q4 to 2000?
Or will the second dip come much earlier to surprise us all?
Of course the current rally is unsustainable. Very simple: we’re heavily export dependent and too small for boosting domestic demand. If USA and Europe economies do not recover and not just their stock markets, we’ll be dead. The current dead cat bounce is the effect of the money pumped into the system. Govt can pump again, but finance minister says there’ll be drastic effects if they keep pumping.
The way the property market is rising again is scary. HDB 5-room valuation 627k, closed at 700k.
If you look at the STI crash of end 97, there’s a sharp V-shape recovery for a short while before retreating to a lower low over 3 quarters. It’s the same this time. After the bailout effects wear off, this bear rally is going to land many kiasu people in hot soup unless they quickly find greater fools to sell their stocks and property to.
After the IRs open, foreign funds will flood Singapore and there will be substantial asset inflation. Those who have not invested by then will be left much poorer. The rich get richer. The smart also get richer. The poor and the unsmart get poorer. It’s a fact of life.
smartie, a more recent and stronger bear rally is from oct’01 to feb’02, which then decline to a second bottom in apr’03. i think history WILL repeat itself.
this recovery is overdone, too much impulsive buying. look at the charts, its a one way up market. its highly unsustainable.
massive monetary n fiscal expansionary policies by govts globally have created a glut of money supply, which supposedly should be flowing to the needy business and people, have been suspected to have flown into assets markets hence driving up the markets.
if these flows continue unabated, it will only result in a greater bubble with only undesirable effects to be seen. all these cries of joy will only end in rivers of tears.
so be careful, jump in now be prepared to jump off anything and fast.
Do you recommend that I sell my shares now and pick them up again after the impending correction?
risk/reward is subjective.
Thanks for the advice. I’ve already sold 1/3 of my shares with the intention to buy back at a lower price.
you did a good job. well done. being tactical n nimble is key now. and remember greed is good but greed kills.
Minister Mah Bow Tan says ‘I wouldn’t say there is excessive speculation at the moment, but there is some element of speculation involved. Some of the practices and habits that you saw in the last property boom, are beginning to comeback, so I think we’ll have to be careful.’
Does that mean we can still buy and sell when the speculation becomes excessive?
I mean we should buy now and sell at the point when speculation becomes excessive.
like what’s said above, don’t be too greedy. get out while profitable. a lot of this speculative rally is due to hot money coming from china. hot money means they come quickly, drive up the market, attract more retail investors, and finally they’ll get out after driving up prices. don’t be too greedy. make some money and get out. buy again later.
interesting blog and comments. always good to hear different points of views… keep them coming.
when i was there the last time, i noticed that the cost of living has risen a lot(!!) in the last few years. singaporeans seem very affluent in general so this would probably not pose a problem for many; my heart goes to the poorer singaporeans though.
pardon me, my previous post was meant for the “Know Anyone Retrenched?” thread.