Past days markets have been facing lot of selling pressure mainly due to Europe debt crisis and might have more selling pressure next week should US super committee fails to make progress in reducing US debt. What more interesting in STI was for past days, S-Reits most of the time termed to be defensive stocks have been facing more selling pressure then previously. This is something definitely worth looking into.
First scenario, funds rotating out of defensive stocks and move to higher-beta. This can be confirmed when there is no funds outflow for the week.
Second scenario, funds are locking in realized profit or trim exposure and that can be confirmed if there is net outflow of funds for the week.
Third scenario, funds are doing accumulation that why prices were being forced down. This can be confirmed when there is no funds outflow for the week and price movement well supported at the supporting level.
Should first scenario occurs, there is a possibility that there will be a year end rally led by the higher-beta stocks. Should second scenario occurs, this could signal the debt issue in Europe probably will not be well contained in the next few months and funds are staying cash for the time being. For the third scenario, funds are definitely still vested in equity and relocate their portfolio to more defensive strategy and hence prices of the S-Reits should rebound once the accumulation period is over.
The movement of the S-Reits could indicating direction of the market for the next couple of weeks.
