INFLATION has peaked but credit markets are still under stress, said Lehman Brothers’ chief Asia equity strategist Paul Schulte.
Even though the best time to own equities is after inflation peaks, continued stress in the credit markets is preventing investors from finding value, he said at a media briefing yesterday.
‘If we believe inflation has peaked and is coming down, and credit stress is peaking, that is the time to buy equities,’ he said, but as ‘credit stress is still aggravated’, the moment had not arrived yet.
One problem, he said, is that Asia’s equity markets are reliant on Western policymakers, referring to bodies such as the United States Federal Reserve, whose Open Market Committee sets the US benchmark interest rate.
‘Technically, we’re in dangerous territory, having broken past previous index level lows,’ he said of Asian markets.
He noted valuations would matter less than what policymakers decide: ‘We are at the mercy of policymakers right now.’
Another issue is lack of liquidity in equity markets, which is preventing investors from buying stocks. Mr Schulte pointed out that liquidity in small- and mid-cap stocks had dried up. In Singapore, such stocks have lost more than half of their value over the past year.
Mr Schulte said these stocks are ‘where the value is in Asia right now, but the problem is, there is no liquidity’.
He advised investors to hold off buying, but to start compiling a list of stock picks, preferably ‘bond-like’ equities that offer high dividend yields.
‘When these things move, they’re going to move 100 per cent in a week - because of policymakers, not because of what investors think,’ he said.
Asked when investors might see an improvement in stock market conditions, he said much would depend on the ‘response of the US government to the aggravating ongoing problems in the US financial system’.
‘The right time will come not when we see a valuation that is cheap, but when policymakers react to a continuation of this problem in the financial structure of the Western banking system.’
1 comment:
Strategist: Don’t buy equities yet
By Yang Huiwen
INFLATION has peaked but credit markets are still under stress, said Lehman Brothers’ chief Asia equity strategist Paul Schulte.
Even though the best time to own equities is after inflation peaks, continued stress in the credit markets is preventing investors from finding value, he said at a media briefing yesterday.
‘If we believe inflation has peaked and is coming down, and credit stress is peaking, that is the time to buy equities,’ he said, but as ‘credit stress is still aggravated’, the moment had not arrived yet.
One problem, he said, is that Asia’s equity markets are reliant on Western policymakers, referring to bodies such as the United States Federal Reserve, whose Open Market Committee sets the US benchmark interest rate.
‘Technically, we’re in dangerous territory, having broken past previous index level lows,’ he said of Asian markets.
He noted valuations would matter less than what policymakers decide: ‘We are at the mercy of policymakers right now.’
Another issue is lack of liquidity in equity markets, which is preventing investors from buying stocks. Mr Schulte pointed out that liquidity in small- and mid-cap stocks had dried up. In Singapore, such stocks have lost more than half of their value over the past year.
Mr Schulte said these stocks are ‘where the value is in Asia right now, but the problem is, there is no liquidity’.
He advised investors to hold off buying, but to start compiling a list of stock picks, preferably ‘bond-like’ equities that offer high dividend yields.
‘When these things move, they’re going to move 100 per cent in a week - because of policymakers, not because of what investors think,’ he said.
Asked when investors might see an improvement in stock market conditions, he said much would depend on the ‘response of the US government to the aggravating ongoing problems in the US financial system’.
‘The right time will come not when we see a valuation that is cheap, but when policymakers react to a continuation of this problem in the financial structure of the Western banking system.’
Post a Comment