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Worst over for stocks, says Lehman Brothers strategist
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| Alvin Foo |
Mon, Apr 28, 2008
The Straits Times
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THE worst is over for global stock markets, as the banking crisis has already been resolved, a top regional equity strategist at Lehman Brothers has said.
Inflation, however, is tipped to remain at worrying levels for about a year, due mainly to soaring food prices.
'We have a very powerful relief rally in our hands,' Mr Paul Schulte, Lehman Brothers' chief regional equity strategist of Asia ex-Japan, said last Friday.
'I don't think we're going back to March... We're in the fifth week of a rally. The rally can go on into the summer,' he added, referring to mid-year.
| Global stocks took a brutal beating last month, as news of US investment bank Bear Stearns' near-
collapse and fresh recession fears in the United States sent investors heading for cover.
The rot was stopped only after the US Federal Reserve intervened with a rate cut.
'The banking crisis is over... We're moving into an economic problem,' Mr Schulte said.
'In a systemic credit crisis, everything gets crucified. In an economic crisis, the good stocks will be rewarded; the bad ones are punished.'
He highlighted the Malaysian market as one to watch due to its agricultural plays and recent change in political structure.
Mr Schulte, who is also bullish about the Taiwan, Thailand and Hong Kong markets, added: 'Capital's being freed up there.'
However, the trade-off for resolving the banking crisis is a weaker US dollar and inflation.
Mr Schulte thinks that the problem of rising prices is here to stay for about a year, due mostly to food inflation.
He believes inflation will increase from 4 per cent to 6 per cent in the US and by a 'couple of percentage points' in Asia.
'We believe inflation will be higher for longer. It will accelerate further, as price caps, subsidies and export bans aggravate price pressures later,' he said.
Inflation across Asia continued to soar to multi-year highs in the first quarter, driven by higher prices for fuel, food and housing.
In Singapore, inflation hit a 26-year high of 6.7 per cent last month.
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