QE3 and tapering issues not settled yet

WORRY over the partial US government shutdown may be dominating current headlines but investors would do well to study the implications of a development that immediately preceded the shutdown, namely the US Federal Reserve's surprise decision not to taper its US$85 billion per month QE3 (third round of quantitative easing) monetary stimulus programme at its Federal Open Market Committee meeting a fortnight ago.

After an initial knee-jerk rally following that meeting, stock markets have floundered, partly weighed down by the political standoff in Washington but possibly also because of the signal sent by the Fed, namely that afte…