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Wednesday, March 20, 2013

KEVIN SCULLY: "Don't Panic Over Cyprus"

Source: http://www.nextinsight.net/index.php/story-archive-mainmenu-60/919-2013/6593-kevin-scully-qdont-panic-over-cyprusq

The following was published yesterday on www.nracapital.com and is reproduced with permission

I 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. 

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