On the last trading day of the year, the local stock market, STI, ended with a drop of 1%(-26pts). Volume was low,with 437 million shares traded. The anemic action showed that investors were staying on the sidelines on what was typically the lowest volume sessions of the year. This could be because many brokers were still away for the Christmas and New Year holidays. It could also be due to the fact that most investors are trading cautiously nowadays and adopted wait-and-see investment positions for the coming year. After all, 2011 had been such a incredibly volatile year and most investors can’t wait for it to be over.
Due to the relative small market size, STI’s performance has always been affected by global stock market’s condition. As a result, there were much volatlity this year caused by the Europe debt crisis, upheaval in the Middle East (Arab Spring), a devastating Japanese earthquake and a struggling United States economy (high unemployment). Stock markets throughout the world were battered by negative news weeks after weeks and investors were made to seek safety in other forms od investments such as dividend stocks, blue chips, gold and Treasuries.
As we look back 2011, most of the problems seemed to be contained or resolved. However, there is a possibility that the Europe debt crisis might escalate into a Euro dollar crisis. Coupled with a potential hard economic landing in China, volatility in the stock markets might continue into 2012.
Be prepared for a roller coaster ride in 2012.…Read more