Flow data shows non-US investors taking profit on US stocks. Perhaps the Dollardex ( DXY) is at a level at which more downside is expected. This is in contrast to the rise in the US indices previously. S&P and Dow Jones Industrials retreated last night but it does look as if the dip has just begun.
As such, some downside can be expected in the coming days. Asian markets like Japan, China and HK can be reasonably expected to retrace “gaps” on the indices. This may drag sentiment down further.
Looking at 3025 – 3050 on the STI here and about 23300 on HangSeng. Suggest that market participants focus on banks and industrials for bargain hunting. Industrials in this case, mean heavy industries like shipbuilding, autos, machinery. Property stocks, even though they are high beta, may not perform as well on the rebound as fundamentals for property in the region remain weak. Commodities may be a high beta alternative but soft commodity and energy prices have moved ahead already.
Fundamentally, the market looks sound and the consensus on 2014 is generally positive with a focus on stock selection. At a moment like this I would prefer to focus on picking the right sectors rather than specific stocks because sectors can turnaround together, and it does not really matter which stock you choose to trade in those sectors.
Once again, the sectors that have been identified are generally banks and industrials. Those who wish to take higher risk can consider the tech stocks and gaming stocks listed in HK. There may be another wave which may include consumer stocks but that is for a later discussion.
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