Global stocks soar on US moves to end financial crisis (20 Sep 2008)

The global stock markets soared over the past two days. Is the worst over? Has the market bottomed?

I don't think so. Q3 reporting seasons will be the real test. Worries about prolong recession will come back and froth to haunt the minds of the investors. Volatility is expected, but I believe it will be a good time to pick up stocks to position myself for the stock market recovery. In mid term of 3-5 years, recovery is defintely expected, the question is when. Going by the strong resolves of the world Central Banks to solve the problems, I would think that the market should fine a bottom sometime in Q4FY08 or Q1FY09, the latest.

Below the STI component stocks performance on 19 Sep 08. It may seem that certain stocks like banks did not surge as much, however, this is because they already have powerful reversal on 18 Sep 08.

We should take the opportunity provided by the turbulence in the financial market to invest in companies which are fundamental sounds and with high beta correlation with STI to take part in the next upswing.
























My Targeted stocks (as of 19 Sep 08):
1. SGX (Target price below $5.00; Expected returns > 100% over 3 years)
2. Capitaland (Target price below $3.50; Expected returns > 100% over 3 years)
3. UOB Kayhian (Target price below $1.00; Expected returns > 100% over 3 years)
4. Kim Eng (Target price below $1.00; Expected returns > 100% over 3 years)
5. STI ETF (Target STI below 2,000 points, Expected returns > 50% over 3 years)


--------------------------

Global stocks soar on US moves to end financial crisis (20 Sep 2008)

Global stock markets Friday cheered US government moves to sooth financial turmoil and a pledge to tackle toxic debt in the US banking system at the root of the crisis.

Battered financial stocks led the markets skyward as investors hoped the worst could soon be over after US authorities unveiled late Thursday a plan to buy up illiquid assets from financial institutions in a bid to get credit flowing again.

The US Treasury, the Federal Reserve and congressional leaders pledged to work through the weekend to hammer out the bank plan as swiftly as possible.

The broad US rescue being drafted reportedly resembles the Resolution Trust Corp., established to clean up US savings and loans after huge losses for those depository institutions in the 1980s.

The United States, Britain and Switzerland banned the short selling of shares, removing one of the main speculative weapons used against financial firms in recent months to drive down their stock prices.

A US Treasury plan to insure money market funds also helped calm jitters and reduced the risk of financial meltdown.

On Wall Street, the Dow Jones Industrial Average shot up 368.75 points (3.35 percent) to close at 11,388.44.

The tech-heavy Nasdaq jumped 74.80 points (3.40 percent) to 2,273.90 and the broad Standard & Poor's 500 index powered 48.57 points (4.03 percent) higher to 1,255.08.

It was the second big rally for Wall Street in two days and came at the end of a roller-coaster week for global markets as the world economy appeared teetering on the brink of collapse.

"Wall Street appears to have turned the corner," said Fred Dickson at DA Davidson & Co.

Central banks meanwhile again poured billions of dollars into the financial system to try to unblock gridlocked credit.

Wall Street investment bank Morgan Stanley, which had complained about short sellers driving its shares lower, leapt 20.7 percent to 27.21 dollars. Some reports said talks on a merger were making progress.

Treasury Secretary Henry Paulson said Friday the massive financial rescue plan would cost hundreds of billions of dollars.

"We're talking hundreds of billions. This needs to be big enough to make a real difference and get at the heart of the problem," he said.

John Ryding at RDQ Economics said "the Treasury and the Fed have finally realized the depth and systemic nature of the crisis. We believe that these actions will constitute the wider firebreak that will contain the crisis."

President George W. Bush meanwhile warned taxpayers they would bear a significant share of the cost during "a pivotal moment for America's economy.

"Problems that originated in the credit markets and first showed up in the area of subprime mortgages have spread throughout our financial system.

"There will be ample opportunity to debate the origins of this problem. Now is the time to solve it."

Dealers said that while there was concern over the cost of bailing out the US banking system, investors were relieved that the authorities were ready to spend what it takes to solve the problem.

"The combined efforts are so great ... there seems to be a coherent belief that this could actually be sufficient to draw a line under what has been a tumultuous 18 months for the markets," said CMC Markets dealer Matt Buckland.

In London, the FTSE 100 index of leading companies rose 8.84 percent to 5,311.30 points. In Paris, the CAC 40 jumped 9.27 percent, its largest one-day gain, to 4,324.87 points, and in Frankfurt, the DAX was up 5.56 percent at 6,189.53 points.

Among the banks, Switzerland's UBS, among the worst hit by the credit crunch, gained 33 percent and British bank HBOS, which was rescued by peer Lloyds TSB in a multi-billion dollar takeover Thursday was up nearly 30 percent.

In Russia, where the markets had been closed for most of the past three days after the biggest falls since the 1998 financial crisis, stocks also rebounded, helped by gains elsewhere and direct government support.

The main RTS index rose 22.39 percent and the MICEX shot up 28.69 percent.

Elsewhere in Europe, indexes gains were also substantial, with Switzerland up 6.07 percent, Italy ahead 8.55 percent and Spain up 8.71 percent.

Canada's S&P/TSX index jumped 7.03 percent.

In South America, Brazil's Ibovespa index surged 9.57 percent and Argentina's La Bolsa de Buenos Aires leapt 10.24 percent, both record gains.

In Asia, Japanese share prices advanced 3.76 percent, Hong Kong jumped 9.6 percent, Shanghai added 9.5 percent and Sydney gained 4.3 percent. — AFP