Recession ending... fragile recovery in process

Recession Ending...Fragile Recovery in ProcessGlobal

economists now believe the global recession ended in Q2'2009 and a fragile recovery has begun in the third quarter. Growth forecasts up being revised upwards across the globe, but most notably in the US and China. The 2010 global GDP forecast is now 3.7%, with GDP growth in the emerging markets at 5.5% forecast to outperform growth in developed markets at 2.2%.

THE International Monetary Fund on Wednesday raised its outlook for the global economy in 2010, but said recovery from the worst recession since World War II would be sluggish. The IMF boosted its 2010 global growth forecast to 2.5 per cent, an improvement of 0.6 point from its April forecast. However, the global recovery is not yet self- sustaining and is likely to be very slow.

Singapore Market Update
On 16 July, Singapore reported growth of 20.4% in second quarter'09 GDP over the previous quarter, making Singapore the first Asian economy to get out of a technical recession. The government has raised the 2009 growth forecast from to -4% to -6% this year. However, there is caution in the fact that one quarter of growth does not signify a definite upward trend. At the same time, it is agreed that the recovery process remains frought with risks. Markets can still be shaken by bad news from global economies.

Remember however that the stock market anticipates the economy and moves up 6-12 months before the economy recovers and that is why the STI has been rallying so strongly for the past 4 months.

Action on PortfolioThe current PE ratio of the STI is about 12, slightly undervalued from the historical average of 15. At it's current level of 2,300 points, it has got a 65% upside to its pre-crisis level of 3800 points. Of course, this will not happen overnight, with lots of ups and downs along the way. Since the STI hit its recent high of 2,400, it has only pulled back 5% to its current level.

While I wished the market could have gone a lot lower, there is a strong possibility there is more near term upside given the stronger than expected economic data. I do not hold any singapore stocks but my good friend and Adam has started to buy back his core holdings of STI ETF, SGX, Capitaland and UOB. However, there are current only slightly undervalued so he is only taking a small position. its all about patience and we are both hoping for more downside so that we can buy more at a bigger discount in the next few months.

These are his recent buys:
15 Jul Buy STI ETF at $2.40
15 Jul Buy SGX at $7.05
15 Jul Buy UOB at $14.90
14 Jul Buy Capitaland at $3.40

* Note that STI ETF is not reflected in the online portfolio because of technical reasons, the market data cannot be pulled.

US Market Update
Up for a third consecutive session, the Dow Jones Industrial Average (DJI) climbed 158.10 points, or 1.9%, to 8,517.5. The S&P 500 Index (SPX) added 16.41 points, or 1.8%, to stand at 922.25, with materials and energy shares fronting the broad market gains, while the Nasdaq Composite (RIXF) rose 43.97 points, or 2.4%, to 1,843.7.

What's driving this rally? The start of this new earnings season has been very encouraging. Goldman Sachs (GS 149.66, +0.22) unveiled earnings of $4.93 per share for the second quarter. Johnson & Johnson (JNJ 58.23, +0.51) reported better-than-expected earnings and Intel also exceeded expectations. In addition, Well regarded Wall Street analyst Meredith Whitney encouraged buying in the financial sector by indicating that bank stocks have strong potential in the near-term. On the economic data side, PPI and Core PPI for June increase more than expected and advance Retail Sales increase more than expected.

I am more active in the U.S markets as there are more tools for research, Very risk averse kind
I have brought in alot during the BIG DISCOUNT period over the past few months, and currently i am only taking a small position, SNP ETF, FXI ETF, VISA Stock. For Visa its only slightly undervalued, where esle the ETFs, there at least another 50% to where it was during the peak, i am waiting for more downside so that i can buy more at a bigger discount in the next few months. And there is always the dip, correction, its all about consistent hardwork and constant learning.

For Adam he brought
14 Jul Add PG at $53.00 (new average price $55.03)
14 Jul Add USO at $32.50 (new average price $35.04)
14 Jul Add PEP at $55.70 (new average price $58.05)
14 Jul Add NKE at $51.60 (new average price $54.65)
15 Jul buy GE at $12
15 Jul buy V at $62.18
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