Before I give a plausible answer, may I ask my readers a question- What are the new driving forces that had changed our market for the last couple of days? We might able to figure out some bearish factors but they are hardly new to us. Threats of persistent high oil prices, inflation and weak dollars have all been with us for some time. Then why the stock market dived deeply this week.
The answer is simple-the market sentiment. Most people are traded on sentiments rather than on fundamental. How long this bearish sentiment could last is hard to say but if the investors shy the marke,it might continue to drift lower. My personal view is the bottom is not too far from now. The P/E now is about 18 for H shares and 15 for blue chips are good levels to buy for the long term investment. It is apparent that the Central Banks are likely to firm up their interest rates in the near future to control the inflation, resulting in a tight credit environment that could hurt the stock market. I can agree no more of this basic inverse relationship between interest rates and the stock market but these impacts are just temporarily. In the long run the Stock Market is self-adjusted following the intrinsic value of the individual companies. As long as the corporations can create positive values after inflation to the shareholders, then the stocks are worth to buy. For conservative investors, I always advise not to put all your eggs in one basket. Try to use average buying approach to minimize the costs and the risks.
If we can remember what were the Hang Seng Index when the level of our one month interest rates say 7% in the 90s or near 0% during the period of SARS, Then you know how to park your money.
For comments please to: schan033@gmail.com
Subscribe to:
Posts (Atom)