Oct 21, 2014

    Positive US data sets the stage for Asia rebound

    MARKETS across the region rebounded yesterday as investors - still reeling from last week's shelling - took comfort in positive United States economic data.

    Strategists from major banks and fund houses are urging punters to soldier on in the face of heightened volatility.

    The benchmark MSCI Asia Pacific Index dropped 2 per cent last week, as an accumulation of fears over risks as diverse as a eurozone recession and the spread of Ebola culminated in one of the most volatile weeks for global stock markets in some time.

    The markets have calmed down somewhat, thanks to surprisingly strong data showing that consumer sentiment in the US hit a seven-year high early this month.

    Home building in the US also rose more than expected last month, the Commerce Department said on Friday.

    Tokyo led a rally in the region yesterday, surging 4 per cent, helping the MSCI Asia Pacific Index to regain all the ground lost last week with a 2.1 per cent rebound.

    The local benchmark Straits Times Index made a modest gain of 13.32 points, or 0.42 per cent, to close at 3,181.05. Hong Kong rose 0.2 per cent while Shanghai climbed 0.7 per cent.

    HSBC Global Asset Management said in a report that it is especially positive on equities in Asia excluding Japan, as well as corporate bonds, amid the current volatility.

    Asian equities are trading at valuations below developed market stocks, suggesting the potential for attractive returns over the long term, wrote Herve Lievore, senior macro and investment strategist.

    "However, many emerging markets are vulnerable to investor concerns about reduced global liquidity as the Federal Reserve normalises its monetary policy, suggesting these markets could remain volatile for some time," he warned.

    Citi's managing director of global strategy and macro, Mark Schofield, agreed but said this could be a time for investors who are in it for the long haul.

    "We think that the recent volatility in markets is probably just a correction, but we would caution that it only makes sense to act now if you are a long-term, value-driven investor with the ability to weather potentially alarming volatility."

    Slightly over half the blue chips at home ended higher, with bank stocks taking the lead. DBS Group Holdings rose 10 cents to $18 while OCBC Bank added two cents to $9.57. United Overseas Bank was flat at $21.85.

    SingTel was among the top actives, gaining three cents to $3.68 on a turnover of 27.5 million shares.