Not time for bottom fishing yet (page 1 of 3)

US Stocks

When the financial markets are hit by exogenous event like the attack on the World Trade Center, it makes guess work of what the markets will do next to impossible, because psychology more than fundamental takes over. The CBOE volatility index (a measure of expected market swings based on options on the S&P100 Index) was at its highest since October 1998, when investors feared Russia's debt default and the collapse of LTCM would cause a global recession.

Certainly there are values out there, especially when the Discount Cash Flow or Dividend Discount model is being used. Due to the low discount factors (interest rates); the stock valuation may be distorted, particularly in the absence of growth. Furthermore, dividend pay out can be cut or eliminated altogether.

The stock markets are too volatile, and situation too fluid to recommend any serious purchase right now. There will be no quick resolution to the fight against global terrorism; US response is expected to be hard and swift, but this couldl lead to heightened threats within the US. This uncertainty will put pressure on the financial markets. With the waning of consumer confidence and accelerated layoff, perhaps the property price will be the next to go as the balance sheets of the US consumers are highly geared. In times like these, liquidity is preferred to equity investments.

By punting in such an environment, investors might create more risks for themselves. Therefore, we advise to hold until we assess the pending US military move and response to it. After the dust has settled, investors will refocus on the economy and earnings and they might be disappointed.

It is not the time for bottom fishing (yet), rather it is time for due diligence. If there are opportunities out there,we will keep you posted.

The attached table shows the Altman's Z-score and its global ranking as a reference on wireless and long-distance operators for clients who either hold the stocks and /or bonds.

A score above 3 indicates bankruptcy is unlikely, and below 1.8 is possible. The ranking of 4 means the company is in the top 4% and 95 means it is in the bottom 5%. Some of the indicated net dividend yields looked quite attractive as highlighted in blue. We will follow through on these and advise suitable stocks for adding to your portfolio when we think that the price is right. Right now, it is not yet the case.


US Technology

Negative on technology stocks. On a week-on-week basis, the NASDAQ Composite Index plunged 16% to 1423. Looking ahead into the week, we believe investor sentiment will continue to be weak and the index could potentially revisit the 1998 low of 1357. We believe it is still not the time to buy technology stocks.

With the magnitude and duration of the US retaliatory efforts still not known publicly at the present time, investors have become lost with wild speculations as to the subsequent economic impact in the US. Over the week, analyst have reflected their concerns with the current compounded earnings uncertainty (growth expectations were already clouded before the attack) by downgrading (yet again) estimates for technology issues and have further cautioned that the current 3Q01 technology companies' financial performances will be extremely challenging. In terms of technology spending ahead, CSFB believes the renewed economic uncertainty will lead to a pause whereby IT and capital spending plans will potentially be frozen through the remainder of the year.