[Voodoo Vince]

'Green shoots' overdone
By Gabriel Chen

GLOBAL stock markets are unlikely to plunge back to the lows hit in March but the optimism over 'green shoots' seems overdone.

That is the consensus from a survey of 16 fund managers by OCBC Wealth Management that also found that while the pace of economic decline is slowing, corporate earnings will remain under pressure for the rest of the year at least.

Fund managers - those polled included Schroder Investment Management, Aberdeen Asset Management, SG Asset Management and ING Investment Management - warned markets could be choppy in the near term given the pressure in company earnings.

HSBC Global Asset Management also cautioned that a sustainable recovery in equity markets requires both economic and volatility indicators to stabilise. Stock volatility refers to the potential for share to experience a big gain or fall in value within a predetermined period.

'Economic activities like exports and manufacturing data would need to reach more normal levels in order to suggest that the markets are starting to improve,? HSBC said.

Fund managers said equity markets in the Asia region, excluding Japan, are best positioned to recover from the financial crisis. In particular, many managers are positive on China's long term prospects due to its sturdy economic fundamentals and stable political environment.

'The policy style of the Chinese government has helped to boost the confidence of both private investors and house holds,' said Lion Global Investors.

Fund managers' bullishness about China comes amid other reports questioning whether the Chinese market is entering 'bubble' territory.

For instance, Mr Wei Jianing, a senior researcher at the development and research centre of China's state council, was quoted in the official press warning that about half of China's enormous stimulus lending has not flowed, as intended, into the real economy. Instead, a large part is being sunk into the stock and real estate markets, he said.

The Shanghai Composite Index is up more than 60 per cent this year and is now almost halfway back to its October 2007 peak of 6,092. Experts are not just getting cautious about China's stock rally. Some think the rally here will fizzle out.

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