Market pressure eases but no cause for optimism

ALTHOUGH prices may be close to a bottom after the selling of the past few weeks, which has taken the Straits Times Index down 7.5 per cent for the year so far, it's difficult to be too optimistic about the local market's prospects in the week ahead.

On the minus side, the surprise devaluation of the yuan by China's authorities last week has sent investors scrambling for cover and added weight to our view that the Straits Times Index will remain trapped within a trading range for the foreseeable future, albeit one with a downward bias.

Once the short-covering, which lifted the Straits Times Index on Thursday and Friday, is completed, we'd expect softness to once again set in, although the pressure will not be as intense as that seen last week.