Morgan Stanley upgrades 2009 China market view to
Neutral on belief mini asset-economy upcycle could be developing, but says
still watching for signs liquidity growth wearing out, “which could see the
mini cycle end in tears.” Notes risk house’s cautious market view could be
pushed forward to 2010 for double-dip. “Relentless liquidity supply globally
seems to have gone beyond the capital markets and generated stabilization in
the world economy, and even reaccelerated China by stabilizing/reflating all
(potentially risky) assets’ prices.” But adds, mini-cycle unlikely to sustain
to multiyear recovery boom as China can’t sustain rest of world
single-handedly, world can’t afford high asset, commodity prices. “After the
asset bubble sucks in enough risk chasing capital and grows too expensive for
the underlying economy to afford, it usually busts.”

CIMB says temporary pullback in Singapore equity market
looks likely; “equity markets are all hyped up and that makes us worried.” Says
global economic picture remains cloudy given potential inflation risk, concern
that higher oil prices could sap consumers’ buying power. “While everyone in
equity markets is growing bullish by the day, it is worthy to note that the
U.S. still faces tremendous headwinds.” Advises temporary caution as says less
positive economic data could see equity markets lose steam. Still, expects
coming pullback to be short-lived and maintains Overweight position on
Singapore market, says is likely to advocate return to cyclicals such as NOL
(N03.SG), Indofood Agri (5JS.SG), SGX (S68.SG) and SembMarine (S51.SG) post
pullback. Maintains end-2009 STI target of 2300 and heading towards 2010
expects STI to approach 2720, which would be equivalent to 16X FY10 PE.
Benchmark index last +0.7% at 2393.61.

Debt from companies with some of the lowest credit ratings had its best month ever last month, in yet another sign that sentiment is continuing to improve, even on some of the most stressed assets.

The leveraged loan market has staged a strong rally as consensus that a recovery is just around the corner becomes more entrenched, prompting investors to look further and further down the ratings spectrum in a bid to boost returns.

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