Akan Datang - Stock Market Correction?

The May-June period is traditionally a lull period for stock markets, and the occurrences in the past few days, epitomised by Nikkei's 1000-point last Thursady, have given me "hope" that this may again be happening this year. This explains why other than Midas, I have not loaded up on stocks. Patience is a virtue if anyone wants to make a killing in the markets.

Going forward, if markets are going to retreat in the weeks ahead, there is little cause for panic. Instead, one should be buying.

Two well-respected fund managers, Tan Teng Boo (this is someone I respect too) and Kevin Lyne-Smith, provided reasons on why we should buy if markets correct.

Tan (The Edge, May 2013) points out that "global equities, propelled by US stocks will continue to rise because the worst is over for the five-year global financial crisis that started in 2008 and ended in 3Q2012. Other points he made include:

• US economy currently has a lot of cylinders to sustain its recovery
• S&P will reach 1,800 to 2,000 in the next 3-5 years
• It is a matter of time before the Asian indices like HK and S'pore catch up and  break their 2007 highs

Kevin (The Edge, May 2013) reiterated the case for stocks with reasons why the US recovery is sustainable. This is due to:

• US is back in growth mode
• US real estate has picked up
• There is broad-based improvement in employment
• Credit in US is easing
• PE ratios of stock indices around the world are still below their long-term averages

However, Kevin is currently not very enthusiastic on Asian stocks, as they are weighed down by concerns of slower growth in China, and hence, lacklustre demand for global commodities and natural resources.

He also advised on 2 impending events in the coming months that could cause a correction: Germany's elections and significant slowdown in China. Nonetheless, he is optimistic these scenarios will work themselves out eventually.

So, sit tight, and monitor closely for opportunities should markets correct in the weeks or months ahead.