With so much pain going around, is it time to buy yet?

THE Hang Seng Index has lost 34 per cent since its all-time high in October; the Straits Times Index 27 per cent. In China, the Shanghai Composite's fall from its own record high in October is now 38 per cent and the Shenzhen Composite's loss is 27 per cent. (You'd have to wonder whatever happened to the seemingly unstoppable China growth story?)

In normal circumstances, numbers like these would have contrarians rubbing their hands in glee - after all, it's a well-known fact of market life that the best time to buy is when fear levels are high and equities are a dirty word that no one wants to know. So given the widespread pain markets are buckling under, you'd have to wonder - is it time to buy yet?

These are, unfortunately, not normal circumstances. Over the past two months, investors have witnessed an unprecedented four emergency moves by the US Federal Reserve to shore up its financial markets - an emergency 50 basis-point federal funds rate cut on Jan 22, a US$400 billion plan to accept distressed mortgage securities as collateral in exchange for issuing US Treasuries announced last Tuesday and the weekend bailout of Bear Stearns, together with arrangements to act as lender to financial firms which previously were not entitled to seek the Fed's help.

So far, the markets have not responded well to these moves - Asian stocks continued to tumble yesterday, and given that Bear Stearns is now to be taken over at just US$2 per share versus its Friday closing of US$30, investors are clearly betting on more Wall Street pain in the days ahead, especially if there are more Bear Stearns-type collapses lying ahead.

And therein lies the problem - although Asian markets have been battered to lows not seen since the end of 2006 and may arguably not be far off their bottoms, the primary source of global woes, which is Wall Street, has not followed suit.

In other words, despite all its wobbles over the past six months, Wall Street is probably still too optimistic about the state of its economy and the effect the impending slowdown will have on earnings. It may also not have fully priced in the extent of a prolonged slowdown, nor fully appreciated the risks the financial system faces if there are more banking failures to contend with.

To borrow a well-worn broking cliche, until 'valuations appear more reasonable', Wall Street remains the major stumbling block to any rebound here.

As far as the Singapore market is concerned however, the declining volume of the past fortnight and somewhat lowered volatility suggest some sort of exhaustion or selling climax setting in, which might then lead to a minor rebound of sorts within the next week or so.

However, an absence of sellers does not automatically equate to the presence (or influx) of buyers and, as has been shown repeatedly over the past three months, powerful bounces usually lead to equally powerful plunges. The answer to the question of whether it's time to buy is therefore clearly: 'not yet'.

Wa....lua, with shares trading at less than their value at end of 2006.....things are still nok. Eg...Synear - down for 4 days straight then up for only 1 day then again down for the next 2 days. In all....lost about 30% of it's value in just 7 days of trading. Fucked....what a rubbish?