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Thursday, 9 April 2009
Stock Gain Is ‘Dead Cat Bounce,’ Aberdeen Asset Says
The rally in global stocks over the past month is a “dead cat bounce,” as companies report “terrible” earnings this year and the global recession persists, Aberdeen Asset Management Plc said.
Stock Gain Is ‘Dead Cat Bounce,’ Aberdeen Asset Says
Chen Shiyin and Susan Li, Bloomberg 8 April 2009
The rally in global stocks over the past month is a “dead cat bounce,” as companies report “terrible” earnings this year and the global recession persists, Aberdeen Asset Management Plc said.
Investors should instead focus on companies with strong balance sheets and sustainable business models that can weather the “severe recession,” Hugh Young, who oversees about $37 billion as managing director of Aberdeen Asset’s Asian unit, said in a Bloomberg Television interview. He favours regional financial companies and holds stakes in Singapore’s Oversea-Chinese Banking Corp. and United Overseas Bank Ltd.
The MSCI World Index fell 0.4 percent as of 9:54 a.m. in Singapore trading, taking its losses this week to 2.9 percent. Global stocks had rallied 23 percent in the previous four weeks amid speculation that government stimulus efforts will mitigate the recession.
“It does feel very much like a dead cat bounce if you like, or a bear market rally,” Young said. “The fundamentals for the stocks we’re looking at are not improving and this year is going to be pretty bloody for earnings, if not into next year as well.”
Investor Marc Faber, who recommended buying U.S. stocks before the steepest rally in more than 70 years, yesterday said he expects the Standard & Poor’s 500 Index to retreat as much as 10 percent before resuming gains.
George Soros, the billionaire hedge-fund manager, also said this week the four-week rally in U.S. stocks isn’t the start of a bull market because the economy is still contracting.
Still, losses in the past year means stocks are trading at “comfortable valuations,” allowing Aberdeen to add to its holdings as prices decline, Young added. The MSCI World Index is valued at 13 times reported earnings, almost half its 10-year average multiple of 22 times.
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Stock Gain Is ‘Dead Cat Bounce,’ Aberdeen Asset Says
Chen Shiyin and Susan Li, Bloomberg
8 April 2009
The rally in global stocks over the past month is a “dead cat bounce,” as companies report “terrible” earnings this year and the global recession persists, Aberdeen Asset Management Plc said.
Investors should instead focus on companies with strong balance sheets and sustainable business models that can weather the “severe recession,” Hugh Young, who oversees about $37 billion as managing director of Aberdeen Asset’s Asian unit, said in a Bloomberg Television interview. He favours regional financial companies and holds stakes in Singapore’s Oversea-Chinese Banking Corp. and United Overseas Bank Ltd.
The MSCI World Index fell 0.4 percent as of 9:54 a.m. in Singapore trading, taking its losses this week to 2.9 percent. Global stocks had rallied 23 percent in the previous four weeks amid speculation that government stimulus efforts will mitigate the recession.
“It does feel very much like a dead cat bounce if you like, or a bear market rally,” Young said. “The fundamentals for the stocks we’re looking at are not improving and this year is going to be pretty bloody for earnings, if not into next year as well.”
Investor Marc Faber, who recommended buying U.S. stocks before the steepest rally in more than 70 years, yesterday said he expects the Standard & Poor’s 500 Index to retreat as much as 10 percent before resuming gains.
George Soros, the billionaire hedge-fund manager, also said this week the four-week rally in U.S. stocks isn’t the start of a bull market because the economy is still contracting.
Still, losses in the past year means stocks are trading at “comfortable valuations,” allowing Aberdeen to add to its holdings as prices decline, Young added. The MSCI World Index is valued at 13 times reported earnings, almost half its 10-year average multiple of 22 times.
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