As the eurozone crisis continues to pull down regional markets, several market analysts are cautious on the prospects of equities in the short term.
However, many analysts believe that a sustained bear market is not happening soon, as the global economic recovery that is still on its way may push the market forward.
According to Mr. Ng Kian Teck, an investment analyst at Sias Research, Asian markets dropped four percent early last week but bounced back smartly before the end of the week, leaving several Asian markets in the positive territory.
In the region, the Hang Seng Index in Hong Kong increased 1.13 percent over the week, Straits Times Index of Singapore dropped 0.5 percent over the shortened trading week to 2,739.70 points and China’s Shanghai composite index increased 2.8 percent last week.
Mr. Ng said that such volatility may likely continue this week as Asian markets await developments from the debt crisis in Greece, as well as the imminent tension between North and South Korea.
Other risk factors like the Chinese government’s moves to curb its real estate market, downgrading of sovereign debt efforts and ratings to reform the financial sector in the US could also dampen market sentiment, according to several analysts.
Lower trading volume from investors taking a wait-and-see approach also gives additional catalyst for the volatility, Mr. Ng said.
"The Asian market has been trading in a wide band for the week," he said, cyclical sectors including resource and oil and gas have suffered volatility.
Still, the local market in Singapore has remained quite resilient so far.
"The local market is currently trading at a price-earnings ratio of 14 times, which we deem to be attractive," Mr. Ng said.
While the present volatility may weigh on the financial sector’s performance in the near term, DBS economist Irvin Seah said: "domestic segments of the sector such as mortgage loan and insurance activities have remained resilient despite the external risks."
But Singapore’s industrial and export performance in the coming days may likely experience some slowing down during the second half as a result of the eurozone crisis.