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Broker's take: Paris attacks to reinforce predisposition towards lower global stock prices, says DBS
THE Paris attacks, as appalling and as tragic as they were, are unlikely to have a lasting impact on the markets, wrote Lim Say Boon, chief investment officer at DBS Bank in DBS Asian Insights.
Global equities were already correcting before the terrible events of Friday night, he said, adding that previously, the local lender had said global equities would likely trade weaker into December as markets digested the growing probability of a US Federal Reserve rate hike amid a slowing global economy, and the beginnings of earnings contraction in the US.
Last week, the local lender also warned that the Chinese equities rally was running out of steam as incoming economic data remained weak.
"What the Paris events will do is reinforce the predisposition towards lower stock prices throughout the world. Beyond that, there will be rebounds, probably late this year or early next year. But the primary trend in global equities is sideways to weak. Meaning, the rebounds that will likely come after the year-end correction will be counter-trend rallies - bounces within a downtrend channel," said Mr Lim.
The fundamentals underlying the weakening trend will likely be a slowing global economic growth amid rising rates in the US; market fear that economies are not responding sustainably to further monetary stimulus; "full" equities valuations in developed markets; contracting earnings in the US; and continuation of earnings recessions in the emerging markets, he said.