-Global growth may average 3.25 per cent to 3.5 per cent in the next three to five years, well below the 4.7 per cent pace of the five years leading up to the 2008 slump, estimates Stephen Roach, non-executive chairman of Morgan Stanley Asia.
- The fair value of the Standard & Poor's 500 Index is 900, according to Jeremy Grantham, chief investment strategist in Boston at Grantham Mayo Van Otterloo & Co. That's 22.5 per cent below the July 23 close of 1,102.66 in New York. He says developed economies will be 'lucky' to grow 2 per cent annually for the next seven years, and he favours stocks of companies with high, stable returns and less debt.
-In a sign of strength, data last week showed the UK economy expanded 1.1 per cent in the second quarter, the fastest pace in four years and almost twice economists' forecasts. German business confidence unexpectedly surged to a three-year high this month, according to the Ifo institute in Munich. Its index based on a survey of 7,000 executives jumped to 106.2 from 101.8 in June, the biggest gain since 1990.
-'There will be possibly a period of slower growth beginning in end markets later this year,' George Buckley, chief executive officer of 3M Co, told analysts on July 22. 'This isn't a double-dip per se,' he added. 'It's just a soft spot and very normal as economic growth takes a breather for a while and adjusts to new circumstances.' The St Paul, Minnesota-based company is considered an economic bellwether because its product range spans the automotive, consumer and health-care markets.
-Much of the deceleration in underlying growth appears likely to come in the industrial world. US consumers are still working off the debts they built up during the housing boom. Since hitting a record US$1.39 trillion in the second quarter of 2008, household debt has fallen steadily to US$1.35 trillion in the first quarter, according to Fed figures.
-SINCE the start of the year, investment sentiment has swung between optimism and fear, buffeted by myriad issues ranging from European debt to US unemployment. Barclays Wealth's investment view reflects this dichotomy - a 'bimodal' world, as chief investment officer Aaron Gurwitz puts it, where the probability of the potential outcome is almost evenly split between a positive market where stocks deliver a double-digit return, and a negative one where deflation ensues.
-In a statement, Michael Hartnett, chief global equity strategist at BofA Merrill Lynch Global Research, said: 'Growth and profit expectations have double-dipped. Should upcoming data fail to confirm a double-dip, risk assets will have a much better third quarter.'
-Barclays Wealth Asia strategist Manpreet Gill also advises a 'barbell' approach to a stock portfolio. The bank's buy list, for instance, favours two segments - relatively defensive and income oriented names which can be found among Singapore stocks; and Hong Kong stocks which are more cyclical and recovery oriented. Some examples include A-Reit, DBS, and M1; and Hong Kong's China Shenhua and Beijing Enterprise.
- Shares rebounded in the past three weeks as 84 per cent of the 149 S&P 500 companies that reported results since July 12 topped the average analyst earnings estimates, Bloomberg data show. Profits may rise an average 35 per cent in 2010 and 17 per cent in 2011, according to forecasts tracked by Bloomberg. More than 160 S&P 500 companies are scheduled to post quarterly results this week, including Irving, Texas-based ExxonMobil Corp, the biggest US oil producer.
- Property- Property plays benefiting from tourism boom
The Singapore Tourism Board (STB) released yet another good set of tourism
numbers for June yesterday, indicating we are on the brink of touching the last
tourism peak in 2006. We believe 3Q performances will top 2Q performances with
mega-events lined up in Singapore. Top property beneficiaries of the tourism boom
will be hospitality stocks with maximum re-pricing ability; followed by retail-related stocks which are able to capture sales upside in gross turnover rent. Hotels and retail malls in prime locations or near tourist hotspots such as the Marina Bay area, Sentosa and Orchard Road should do markedly better than other locations, in our
view.
-Net inflows in June. Net inflows for EM Asia came up to US$0.76bn in June, a reversalfrom the sharp US$2.8bn outflows in May. Asean-4 markets all benefited from netinflows in June, with Malaysia receiving net inflows for the first time since Nov 09.Cumulatively, only Indonesia and India drew positive net inflows in 1H10. There werecumulative outflows in China, followed by Hong Kong, Taiwan and Singapore. While
cash holdings climbed marginally in June, the risk appetite may be picking up with
weightings raised for cyclical stocks across Asean.
-Choppy markets. European debt concerns linger in the background. We maintain that
while moderating growth is to be expected, risks of a double-dip recession remain low.Markets would likely continue to trade around mid-cycle P/E and P/BV valuations, withup to 8% upside expected to end the year. On a regional sector basis, tech, financials,utilities and small-cap offshore & marine remain attractive on a market-adjusted ROE toP/BV basis.
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