Another week full of events !!
Firstly, Greek PM Papandreou surprised everyone in earlier part of the week to call a referendum vote on whether to accept EU/IMF bailout aids and Euro membership. That piece of news shocked everyone and ended up EU leaders to summon him to an emergency meeting before the G20 Summit. Global stock markets fell in fear of Greece total default and could spread to Italy and Spain. The outcome of the emergency meeting was an order by other EU leaders either Greece accept the bailout aids and stick to the conditions ( austerity measures ) or get prepared to kick out of Euro and thereby no more bailout aids. Greece then cancel the referendum vote on whether to accept EU/IMF bailout aids but continued ahead to hold a confidence vote for the PM. Latest result from the confidence vote, Papandreou won but is prepared to step down and together with opposition parties to form a coalition government to tackle the debt crisis.
Secondly, EU leaders were prepared to woo Brics leaders during the G20 Summit to invest in its EFSF to enlarge it to1 trillion euro to fight the current EU debt crisis. The sudden move by Papendreou has some how dented the sentiment and at the end of the G20 Summit, the outcome was G20 leaders were agreed to boost the resources of IMF fund to help curb the European debt crisis while no further details were given as to where the monies are from. In another events at G20 Summit, Italy accepted monitoring by IMF and EU in its fight to reduce its debt while signaling at the moment it does not required any monetary aids from them.
Thirdly, ECB in its latest meeting cut interest rate by 25 basis point from 1.50% to 1.25% after signaling that Europe zone is entering mild recession with the debt crisis. On the other hands, US Fed maintained low interest rate till 2013, slashed growth forecast and is prepared to roll out another stimulus package ( namely QE3 ) if required to support the economy should it be affected by all the downside risk factors.
Lastly, MF Global became the first non-EU victim due to the EU debt crisis to file for bankruptcy. Though it is not like Lehman Brothers but did have a negative sentiment as fear of a chain reaction to others might be the same.
Global stock markets whip saw with another volatile sessions with all those news. As a whole, those series of events basically neutralize each others ( the goods canceled the bads ) with the fact that EU debt crisis is still far from totally resolve but EU leaders are moving in the correction direction to rectify it steps by steps.
STI hit an intra-day low of 2,521.95 on 5th Oct 2011 and since then rebounded to 2,848.24 ( 4th Nov 2011 closing ), a 326.39 points or 12.94% despite the continuation of mixed bags of news. The fact that STI has hit the bottom at 2,521.95 remains to true at the moment. The EU crisis has reached a systemic dimension, world leaders realized the seriousness of that and are fully committed to resolve the issue. When you have a consensus of how bad the situation is now, that wake-up call is more than enough to justify that further downside is impossible. While so far none of the analysts nor any chartists coming out to claim that 2,521.95 on 5th Oct 2011 was the bottom, that doesn't mean it is not. What can move the market is none other than funds, since hitting the bottom on 5th Oct 2011, funds outflow has ceased and in fact inflow was detected instead.
Investors with higher risk appetite could be considering buy on dips when market fell with those negative news. On the other hands, risk adverse investors might continue to stay sideline and wait till confirmation of everything were cleared. Do note that by the time confirmation of everything are ok then, market might have move up 20% from the bottom and that the premium to pay for for being risk adverse.
Food for thoughts
"Stock market is all about risk, calculated risk"
