AROUND this time every year, I write a column on how the stock market is likely to behave in the coming Lunar year.
It is one of the more pleasurable tasks which I do as the stock market reporter.
I study the characteristics of the animal, associated with the year, and try to fit them into the trading trend which has emerged in January.
I always enjoy writing it, because it is light-hearted and tongue-in-cheek, capturing the joyous mood which accompanies the Chinese New Year festivities.
It turns out that the Earth Ox will be gracing this year.
Considering the upheavals we had suffered in the previous 12 months, its virtues will be sorely needed: Hard-work, frugality and patience.
How apt. Investors will have to prod along in a slow and steady manner to rebuild their portfolios in order to enjoy a bountiful harvest in future.
Some will say that I can use some of the ox’s virtues myself.
Wasn’t I a tad impatient, musing about the possibility of a Chinese New Year rally two days ago, only to be chided by a steep 60 per cent drop in the benchmark Straits Times Index yesterday?
I am keeping my fingers crossed that the rally will still come to pass. STI is so far up 25 points today.
When I blogged on Wednesday, I had failed to reckon with a party spoiler known as Wall Street who was brawling for more bail-out money, just as the world was getting ready to give a rousing welcome to America’s hope, Barack Obama, as outgoing President George W. Bush put it this morning.
Like a spoilt brat, Wall Street wants everything to go its way. Ben Bernanke had obliged by slashing interest rates to almost zero, making costs of borrowing almost zero. And after a particularly brutal selldown last October, even US legislators were cowed into parting with a US$700 billion rescue package.
Now, it is Obama’s turn to feel the heat as he takes office next week.
And the unfolding drama on Wall Street rivals any thriller produced by Hollywood.
It is difficult to believe that after getting US$350 billion from the US government, US lenders are going back to ask for more money.
Last month, there was an intense debate over the bonuses to be paid in investment banks, despite the gigantic bailout they have received.
Merrill Lynch’s John Thain had to be dissuaded from asking for a US$10 million payout in return for selling his firm to Bank of America.
It has now emerged that BoA almost bolted from the deal, and was persuaded to stay on course, only because it was promised billions more in bailout money by the US government.
And the woes at Citigroup continues to fascinate investors.
Which doctor would advise you to purge the poison from your body by amputating your healthy arm?
Yet, that is what the beleaguered financial giant is doing by selling its profitable Smith Barney arm to Morgan Stanley, while the toxins from its bad loans in its books continue to poison it.
It is also strange to find Morgan Stanley, itself the beneficiary of a handout from the US government, making a hard sell call on HSBC whose management had, so far, managed to avoid to ask for a handout or fresh funds from its shareholders.
On the local front, it is nice to watch DBS Group Holdings staging a mild rally, after it agreed to extend an interest-payment-only scheme to cash-short home-owners when it was prodded by The Straits Times to do so.
It is testimony that DBS is doing something right – even though detractors may claim that it is nothing special and the bank was only looking after its own interests.
To put things in perspective, we have to consider what banks in other parts of the world are doing. They are hanging on their capital and refusing to lend even to their best customers.
In some cases, they are even trying hard to accelerate repayment of loans, after claiming that the covenants have been breached.
We certainly live in interesting times. Watch this space.