Published December 2, 2008

V Day: good time to fall in love...with stocks?

If market bottoms in '09, it is likely to be in mid-Feb: Saxo

By LYNETTE KHOO

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IF you're wondering when it will be a good time to buy stocks, mark this date on your calendar: Valentine's Day next year.

'It's the earliest we could be seeing the market bottoming,' says Tey Tze Ming, market strategist at Saxo Capital Markets.

His rationale? Company CEOs will likely squeeze all the losses into 2008 so they 'can start 2009 on a fresh sheet and hopefully make some bonuses'.

'By Feb 15, one day after Valentine's Day, we would have seen some 75 of the fourth-quarter numbers come out, so the market would be pricing in an extreme poor case and it tends to over-reach. If there's a market bottom in 2009, that's going to be the most likely day,' Mr Tey told reporters at a briefing yesterday.

Although governments worldwide are pump-priming economies to get growth moving again, the lag of their fiscal policies means any major benefit will seep in only towards the end of 2009, said Christoffer Moltke-Leth, head of Asia-Pacific sales trading at Saxo.

'We believe the massive deleveraging we have been seeing in the second half of 2008 will continue into the first half of 2009,' he said. While the financial sector has grabbed the headlines this year, broader industry, including the auto sector, will be hit next year.

Asia is expected to outperform the US and Europe and lead economic recovery, given its high savings and as its governments smooth out the recession and ease the pain on Main Street by spending more on infrastructure.

But 2009 will still be a challenging year for the region, according to Mr Tey. India may struggle to find a bottom in the early part of the year, Japan will continue to disappoint and Singapore could see a flat year for stocks, he predicts. He is pegging a year-end Straits Times Index target towards 2,000 points and the bottom at 1,500.

To profit from a flat year, Mr Tey says investors must be selective in stock picking. Saxo uses oscillator indicators such as the relative strength index (RSI) to buy on oversold positions and sell on overbought positions.

Mr Moltke-Leth recommends 'playing safe' in 2009 by sticking to value plays instead of growth plays. He goes for defensive sectors and consumer staples, while staying away from automotive and cyclical plays.

Commodities could be a good bet for 2009, he reckons. The price of oil has seen two distinct phases this year, he notes - a surge in the first half and a slump in the second half. The price is expected to bottom out at US$40-45 a barrel as Opec is likely to come up with further production cuts, then rebound to US$80-100 a barrel by end-2009, he believes.

Mr Moltke-Leth also expects gold prices to rise next year. If pump-priming stimulates economic growth, high inflation may return, pushing investors towards gold as a hedge, he says. The prospect of China diversifying its massive foreign exchange reserves into gold would also drive gold prices higher.

On the forex front, Mr Tey advises investors to short the US dollar/yen as the greenback's recent strength is expected to dissipate with the printing of more US dollars for America's massive bailout package.