Wednesday, September 1, 2010

Morning Call - Edgy September For STI

The Dow Jones Industrial Index closed about 5 points up to close 10014.70 on Tuesday. The local stock market meanwhile closed 6.73 points lower to 2950.33 for the last day of August.

The direction for September, in my opinion, is that the STI could close 3% higher at the end of the month. The US Fed has announced measures to prop up the economy, which includes the purchasing of more securities. When that happens, the stock market should move higher by the government driven purchases.

However, I think that this only makes the bankers happy. To-date, a lot of the money that the US government has spend to stimulate its economy has yet to reach the grass roots level. Despite a terrific stock market rally, much of the US remains jobless, as witnessed by the still high unemployment rate and jobless claims, together with the slow housing starts.

This is the same in the case of China. The immediate impact of the much vaunted Rmb4 trillion stimulus was to send stock markets and property prices soaring. Since reining in on the easy credit, due to fears of overheating, the Chinese stock market has underperformed even most of regional indices.

Having said that, my call for the month of September remains that the STI close 3% higher, on the premise that government intervention in the US will have an uplifting effect to smaller equities market in the region.

STI on 31 August 2010 : 2950.33
To Beat 30 September 2010 : 3038.84

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