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Analysts optimistic about post-LNY stock rally

Hopes of a pre-Lunar New Year stock rally have been dashed, with the Singapore market closing 0.68 per cent lower on Thursday. However, some analysts remain optimistic for a post-Lunar New Year rally.

SINGAPORE: Hopes of a pre-Lunar New Year stock rally have been dashed, with the Singapore market closing 0.68 per cent lower on Thursday.

However, some analysts remain optimistic for a post-Lunar New Year rally.

This week's emerging markets' sell-off saw Asian shares approach five-month lows.

That, coupled with the US Federal Reserve's decision to scale back its bond-buying programme, gave investors ample reason to dump shares.

The Singapore bourse - which only traded for half a day on Thursday - dropped 20.71 points to end at 3,027.22.

Compared to a week ago, the market is down 2.4 per cent.

Sani Hamid, director of wealth management at Financial Alliance, said: "The mood is quite bearish. The catalyst for any particular rally is not there.

"We will be in a very volatile period for the next two or three weeks, or even more. However I think it is good to take a few steps back and look at the bigger picture, and when you do so, you will realise that we are in a world where liquidity is still abundant.

"We think that equity markets is still the place to be. What we are seeing today is basically just a correction or a very bad bout of sentiment."

Other issues that have been weighing on sentiment in the Singapore market include the recent rout in emerging market currencies, and worse-than-expected economic data coming out of China.

But some analysts said the current slump in Asian markets presents a buying opportunity.

Wong Sui Jau, general manager of Fundsupermart.com, said: "Valuations, especially in Asia, are quite cheap relative to the developed markets, for example, which have shot up a lot more last year. So there is a valuation gap right now.

"So I feel that on a medium-term basis, especially with the global environment improving, we should actually see Asian equity markets, including Singapore, showing much stronger signs of a rally, probably after Chinese New Year."

Since the Fed announced cuts to its stimulus programme last May, interest rates and yield assets in the region have now become relatively less attractive to US and global investors, leading to capital flight.

But despite wrecking havoc in emerging markets and Asia -- albeit unintended -- the Fed has recently indicated that it will continue its "tapering" track.

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