The Singapore Budget 2011 Effect - Disappointing Investors?

Investors in the STI had a great start in the morning but after lunch a subsequent sell off started. Was it premonition? Did traders eat something wrong?

The Singapore Budget 2011 was punctually delivered from 15:20 onward. As one commentator put it: "There are 7 pages of goodies for the households, and only 3 for businesses."

We are facing elections in a few months, after all. With a GDP growth of more than 14% in 2010, we probably are under no illusions: such years are more the exception than the norm. So, possibly a belated mental hangover ruled investors hearts this afternoon, losing earlier gains in the process.

As for the medium term outlook on the STI, I want to show you the graph again from a previous blog, where I outlined the likely path the index will take. I created the arrows as far back as November 2010.  While that index follows the pattern roughly, the index failed to regain the same upward momentum after the peak at 3300 in November. The size of the envisaged correction in January was about right and we are therefore back on track, cyclically speaking. 

I therefore boldly point to a rise to 3400 by end of March, - possibly even 3500.  What can go wrong?  Well, foreign investors may stay away if they find their home market a more appealing investment environment. I said it often before: Maybe we overshot the mark in November by a mile, giving investors more than they hoped for.  As a result, their appetite is filled - and Asia is mired into more of a sideways action for sometime?

Another factor we should consider is that (don't laugh!) in the Year of Rabbit, Feng Shui pundits expect investors to be "hopping about" more often, - which - translated into financial jargon - means ASSET ROTATION.  This could spell disaster for buy and hold strategies out there.

Still thinking that investing in 2011 will be a "walk in the park"?
I am getting ready for more hard work.
Happy Investing.

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