The following was published yesterday on www.nracapital.com and is reproduced with permission
Kevin Scully, executive chairman of NRA Capital. NextInsight file photoI WAS A bit surprised when news reports surfaced and blamed the problems in Cyprus for the current sell off in global markets.
First let's put Cyprus in some perspective. It has a population of about 800-900,000.
Its annual GDP is about US$23bn - about the same as the market capitalisation of Keppel Corporation.
If you look at the sovereign bond yields of the EU countries - they are hardly changed although Greek 10 year soverign debt is now paying 10-11% yield but this used be to close to 30% when the EU debt crisis was at its peak.
So don't be distracted by the problems in Cyprus and don't panic.
If you attended my talk at the Lim & Tan seminar last week - the key messages I made about stock markets are:
a) we have been in a bull market since 2009
b) bull markets usually last about 56 months and we are now in our 48th month - so we have another 6 to 9 month left for the tired bull to run
c) markets are experiencing extended gains since the rally started in November 2012 and are due for a healthy correction - its a correction ! NOT a cyclical turn from Bull to Bear
d) in terms of forward PER S&P 500 and the FSSTI are trading at about 15-16 times forward PE and about 10-15% below fair PE if earnings are not downgraded
e) i expect the Singapore market to fall and find support at the 2900-3000 level which is a strong support level
f) avoid electronics especially HDD sector, avoid property stocks because of Government policies to bring prices lower
g) I gave a list of 7 blue chip stocks which are worth accumulating when the correction occurs on weakness
h) am bullish on the oil and gas sector and identified three stocks for investors to consider - the cheapest in that group.
i) the penny stock rally is nearing its end but within the group of penny stocks there are gems with fundamentals - any sell off would provide a buying opportunity.
No change in this view - so wait for the correction to gather some steam and be careful of the penny stock rally especially those stocks which dont have enough fundamentals to support their recent gains.
Kevin Scully's presentation slides at the Lim & Tan Securities event are available here.
