December 2, 2008 --- Lest Have Bernanke Put!
It was a day when all risky assets fell as stocks, commodities and oil all get clobbered close to 10%. US stocks plunged and wiped out more than half of last week’s gain biggest weekly rally in 34yrs).
Economic wise, data was weak across the world, from China to Europe to the US, but was unlikely the main cause of the market meltdown…it was Whitney Interview that caused Financials collapsed 17% (after +31% last week), plus it was NBER that officially called the US has been in recession since last Dec. It is interesting to note that over the past 30 years, by the time the NBER gets around to announcing that a recession has begun, it has also nearly ended…But I think this time seems different…Going forward, please forget the Greenspan put, the Bernanke put is way more explicit with Ben saying last night that “for now, the goal of policy must be to support financial markets and the economy”.
So far, December is not shaping up as less volatile than Sep, Oct or Nov as many investors think ...Just looking at intraday volatility in Asia, Surely thin volumes are exacerbating price movements. Strategically, I still think its best to reduce risk in December and wait for 2009. Market wise, S&P looks set to once again test 800 and perhaps challenge its recent low of 741. Local market, it is time to take profit, in particular on Chinese banks --CCB. BOA collapse overnight would certainly make a sale of their existing CCB stake (9%) all the more appealing, especially since they used the govt injection to exercise their option to buy another 10.9% at HK$2.42 (44% lower than ytd)..Yeah, China is saving US banks by this sense…
Oversea Markets Review
After climbing 11% last week, global equity collapsed 6.1% yesterday with US -8.9%, EU -5.8%, UK -5.2% and Japan -1.4%. Elsewhere, 1MWTI oil dropped $5 to $49.28/bbl as OPEC signaled that it would hold off on production cuts until at least mid-month. Agriculture and metals prices also declined, with gold, corn, and wheat each down about 5%, and aluminum and copper prices off just a touch. UST yields continue to sink from already historic lows last week. 2yr yield dipped 8bp to 0.90%, and10yr slumped another 19bp to just 2.73%. USD rose 0.6% against EUR to $1.261 and 0.5% against EM currencies. Meanwhile, Dollar lost +2% vs YEN to 93.2.
