Time to start snapping up stocks?

This story was first published in The Straits Times on Feb 4, 2014

NOW that the local market has retreated below 3,000 points for the first time since November 2012, some investors will be tempted to start buying up stocks on the cheap.

And analysts say they would be quite right to consider jumping in.

But they caution that putting money into the market slowly and selectively is important.

Many brokerages began 2014 with quite bullish forecasts for the stock market in the year ahead as they believed that a continued recovery in the global economy would fuel a rise in share prices.

Despite the latest volatility, most are sticking to those upbeat outlooks. "I think the year should still be relatively positive for stocks, with some bellwether sectors such as offshore and marine, consumer and plantations doing well and driving the market," said DMG & Partners Research head Terence Wong.

Investors thinking long-term would do well to accumulate such stocks during this period, he said.

In December, Mr Wong had predicted that the Straits Times Index (STI) would end 2014 at 3,480 and he is sticking to his guns. "If the market falls to as low as 2,500, then I would review my forecast."

Maybank Kim Eng Research head Ng Wee Siang is also still confident in his forecast, that the STI would end the year at 3,500.

Back in December, his team published a market outlook report for the new year with a "neutral" rating of the market overall.

But it was bullish on four sectors: aviation services, health care, banks and offshore and marine. Mr Ng said he has not changed his stance on this either.

Indeed, the recent falls in the market have led some analysts to tell clients to buy stocks, albeit carefully. "The market has been disappointing, but we are more interested in the valuations, which are low. If the market goes down further, that means valuations will get even cheaper," said Fundsupermart research manager Terence Lin.

He recommends dollar-cost averaging as a way to mitigate the volatility of the market. Using this method, a punter would invest a fixed dollar amount into a certain stock or fund every month instead of committing to buy a fixed number of shares.

So if share prices go up, fewer shares will be purchased, and if share prices go down, more shares will be purchased for that sum.

CMC Markets analyst Desmond Chua said it would be wise to start slow this week at least as the market awaits the latest job numbers from the United States on Friday evening.

Economic data will continue to lead the market one way or another, he said, with a set of disappointing manufacturing data from China recently causing the latest gloom.

"How long the stock market volatility might last, it's hard to tell unless we see better data, for example the jobs data this Friday. If that turns out good, this may be a temporary sell-off," he said.

"But if the data disappoints and we get more weak numbers out of China, then Europe may be the only bright spot."

Voyage Research deputy research head Ng Kian Teck added that it would be good to see some healthy corporate earnings from around Asia too.

"We had expected tapering but we didn't expect it would have such a huge repercussion on emerging market currencies.

"You can buy stocks now but don't give yourself a huge exposure. In the short term, we are likely to face a lot of headwinds, so long-term investors must be prepared to hold on."

This story was first published in The Straits Times on Feb 5, 2014

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