Caution Seen To Dominate Singapore Trading Next Week

Source : The Straits Times, Aug 24, 2007

SINGAPORE shares are expected to trade cautiously next week on persistent concerns that the effects of a crisis in US subprime credits are far from over, dealers said.
Shares regained their bearings following sharp falls last week, but analysts cautioned volatility will remain.

For the week ending August 24, the Straits Times Index soared 238.74 points, or 7.63 per cent, to finish at 3,369.45 on Friday.

Average daily volume totalled 2.19 billion shares valued at $2.54 billion, compared with 2.67 billion shares worth $2.79 billion last week.

Caution is likely to dominate after the head of Countrywide Financial, the biggest mortgage lender in the United States, said problems in the US housing market are far from over and could tip the world's biggest economy into a recession.

'The risk of a US recession is always there,' CIMB GK Research regional economist Song Seng Wun said.

'We won't be immune to the effects of an economic slowdown in the US but we (in Asia) are able to absorb it a bit better now.'

US credit risk evaluator Standard and Poor's said Asian economies should weather any fallout from the current turmoil in global financial and stock markets sparked by the US subprime credit problems.

Most regional economies appear to have learned their lessons from the Asian financial crisis in 1997 and 1998, it said.

'Asian economies have improved their banking systems, reined in fiscal deficits, brought down external debts, built up foreign exchange reserves and improved their current account balances,' said Standard and Poor's credit analyst Ping Chew.

'Any significant and prolonged decline in asset and market valuations could also sap confidence, but while economic activity and confidence remain robust, the Asian economies are likely to suffer minor setbacks but not major reversals.' -- AFP