Jeflin’s Investment Blog

Whew… I expected a severe downturn in the stock market today following a hike in oil prices, freeze on rate cuts by the Fed, declining home sales in April according to the National Association of Realtors, and inflation threats which means spending on essential items takes priority over investments. Wall Street went on holiday but last Friday’s nosedive left a bitter taste when the Singapore market opened.

Fortunately, sell-offs, if any, were not overdone as common sense prevailed. As I mentioned before, there is an admirable resilience in our local stock market. The STI ended 18.85 points down to 3103 while gainers/losers stand at 162/490. SGX took a beating following news of poor IPOs launches; property counters (REITS especially) were not spared either.

Singapore’s economic indicators are still healthy: 6.7 percent year-on-year expansion in the first quarter, only slightly lower than the projected 7 percent. On a quarterly basis, GDP grew 14.6 percent, down from expectations of 15.7 percent. Despite weaker numbers, the Ministry of Trade and Industry maintained its 4-6% economic growth forecast for 2008.

A major concern is that consumer prices increased to 7.6% which may force the Sing dollar to appreciate further and weakens our exports. In the current situation, putting money in the bank to earn interest is foolhardy, our money is being eroded in real terms. We have to earn at least 8-9% from investments to have a positive real rate of return. Needless to say, that kind of ROI is not easy to achieve.

For those who want to play the stock market this week, be more selective and hold for long term as prices will likely fluctuate only within a narrow range.

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