By Goh Eng Yeow
Markets Correspondent
engyeow1@sph.com.sg

 

In the past five years, the first week of trading had always been a good guide on how the market will behave for the rest of the year.

Thus, in 2007, when a tidal wave of foreign money swept across Asia in the first week of January, regional markets went on to experience record high levels for that year, even though August that year marked the start of the Asian financial crisis.

And the start of trading in 2008 was dampened by a huge fall in stock prices. Markets ended that year with its biggest drop in percentage terms in nearly a decade.

The past two years had been marked by rises on the first few days of trading, and prices had obligingly ended higher in 2009 and 2010.

So if the trading trend in the past two days and this morning is any guide, markets are likely to be marked by alternate bouts of exuberance and pull-backs, before ending higher for the year.

In other words, it will be a good year for investors who want to hold on to their purchases, or traders who can ride on the price swings to generate trading profits.

MORE INTEREST

What is also telling is the number of calls I get from friends and contacts asking about the stocks they should pick up in the coming months.

As a market writer, I do not make stock recommendations, but the phone calls I get is a gauge of the buoyant mood among investors. The risk aversion has been banished and people are looking forward to trying to make some money again.

With cash giving almost zero returns and property prices hitting sky-high levels, I am not surprised that people are rediscovering the fun of stock investing once more.

CNBC’s Jim Cramer observed that investors should use the pull-backs like those sales held regularly by huge departmental stores, to draw in the crowd. "When they throw a sale at Macy’s, you buy more stuff. You don’t panic and run screaming from the mall," he said.

Still, I will advise investors not to treat any market pull-back as a signal to buy across the board.

Investors should still do their homework before making any foray into the stock market.

In a globalised trading environment, they should not confine themselves to the local bourse, but scout around for bargains across different markets.

Happy New Year – and invest wisely in 2011.