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

 

REGIONAL stock markets have been experiencing their most serious correction since the start of the year, as investors’ risk appetites get spooked by the unrest in the Middle East.

One remisier sent me a note this morning to say that he got a few calls from clients asking if it was time to start picking up shares again.

It is an indication that investors view the correction as an opportunity to enter the market at a more attractive level, and not simply the start of another bear market where they will merely be throwing good money after bad.

Still, I agree with the remisier’s assessment that it is still too early to commence any bargain-hunting in earnest.

It is simply impossible at this stage to forecast how the Libyan crisis will pan out.

Unlike Egypt or even Tunisia, where the revolution now sweeping the Middle East started more than a month ago, Libya is an enigma with a regime which has been in power for the past 40 years – and no conceivable alternative leadership in sight.

And reading some of the Western newspapers, you get a sense that the country may simply break up into its various warring tribal factions, if the present government loses power.

Given the lack of clarity of the situation, it is going to be difficult to make an informed investment decision on whether it is time to enter the market again, hence the note of caution.

What compounds the problem is that, again unlike Egypt and Tunisia, Libya is a major oil producer and its problem is causing crude prices to rock and roll as they react to each development filtering out of the country which is now closed to the Western media.

While most of its oil is shipped to Europe, any disruptions in its oil supplies will have worldwide reverberations.

The volatility in oil prices is, in turn, sending shock waves across bourses across energy-hungry Asia which is heavily reliant on Middle East crude.

As I write, the benchmark Straits Times Index has fallen 48 points, or 1.6 per cent, its worst one-day loss in two weeks.

It would be interesting to watch how Wall Street reacts tonight to the latest conflagrations in the Middle East, since it was closed for a public holiday yesterday.

The Year of the Golden Rabbit has turned out to be anything but tranquil so far. We are having to cope with wild hops in the market which give us vertigo.