Buoyant Asian stock markets have experienced an exhilarating ride in the past two weeks, and it is nothing short of outstanding.
Prices are restored to levels before the collapse of Lehman Brothers last September, as investors load up on blue chip stocks, worrying of missing what may result to a fresh bull run.
Within the week, the Straits Times Index (STI) in Singapore is on the upswing almost everyday. It is brought about by the occasional profit-taking bout, which marginally brought it down. STI rose 4.2 percent or 102.47 points in the previous week to 2,533.43. This has been the first time they are able to cross the 2,500 level this year, taking its total gain to about 10 percent over the previous two weeks. As such, this reflected the Wall Street’s impressive gain, with the 3.99 percent surge experienced by the Dow Jones Industrial Average in the previous week, sustained by better corporate results and economic data.
To put things into perspective, recapping market movements 10 months earlier could be essential. The Straits Times Index and other extensively market indexes nearly divided in value somewhere between September of last year and March of this year due to the collapse of the investment bank Lehman Brothers, which caused severe stress on global financial system.
The STI subsequently recover its losses between the months of March, and now, as investors are successfully redeemed, apparently persuaded by the fact that the analysts’ painted scenario of a financial doomsday seemed unlikely to occur. However, doubt still surface in the previous month as other indexes and the STI retreated slightly when market watchers argued about the sustainability of the rise of Asian markets in the past four months.
Over the past fortnight, however, the downpour of strong economic data from the region wiped out lingering concerns, starting off with the gross domestic product flash estimates for the second quarter in Singapore. With this, the presumption that Asian economies had sufficient ‘rev’ in them to deal with the slack triggered by the struggling economies in Europe and in the US was made credible.
The sales of cars and the substantial pick-up in the housing market in Singapore also gave the impression that again, it is business as usual.
However, a few market watchers still think that if traders are forcing too much of their luck by trying to depend on the rally for a bit longer as they hope that further upsurge in prices could still be possible ahead.
The current economic landscape is greatly different from that of the previous year, when the world’s financial markets confined the global credit crisis, prior to Lehman Brothers’ collapse.
The crisis already passed through into the real economy since September, triggering widespread menace due to the inflation of jobless ranks and when cash-strapped companies went bankrupt.
Citigroup summarised it all by describing the rally as pricing in a V-shaped recovery in earnings. The company also said that given the heightened expectations of investors, companies had better deliver.