THERE has been a steady stream of reports from analysts trying to convince their clients that it is time to fish around for battered blue-chips, following the relief rally last Friday.
Take DMG & Partners’ market call this morning, telling investors that some stocks are now trading at very low valuations, after the steep drop in share prices in recent weeks.
Its screening process tosses up four stocks – Golden Agri Resources, Li Heng Chemical Fibre, Sino Techfibre and Suntec Reit – which have “potential for significant share price upside going ahead”.
Then there is a Citigroup report outlining strategies for successful bottom-fishing, arguing that the recent rally in stock prices is likely to extend for a while, with all roads leading to value. Investors should look at names which will do well in a recovery, it adds.
But should investors start bottom-fishing, or continue to lay off stocks for a while, in case they end up catching a falling knife?
Going by the 55-point dive in the benchmark Straits Times Index, investors seem to be signalling they are not buying into any of the “buy” stories yet.
Merrill Lynch’s chief US investment strategist Richard Bernstein summed up the fears confronting investors with this observation: “Frankly, we are quite surprised at the markets’ strong positive reaction.”
The US Treasury’s bailout programme does not seem to be aimed at the massive consolidation of the financial sector needed to bring the credit crunch crisis to an end, he added.