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Tuesday, November 3, 2009

Deeper Correction In Stock Markets Expected

Christopher Wood, Equity Strategist, CLSA, says the chances of a deeper correction in global equities are rising. "There is some initial indication of a technical breakdown in the US. Our best case scenario is 1,200 on the S&P 500 by year-end."

He feels an easy monetary policy in Asia can create asset bubbles. "The worst case correction in Asia is at one-third of highs." Wood advises investors to use significant corrections in Asia to buy stocks. “We have reduced our weight on India, and increased our weight on China."

According to him, India is most likely to see the first rate hike in Asia. But was quick to add that the Reserve Bank won't be aggressive in monetary tightening.

If we go by his opinion, worst case correction could be one-third of highs in Asia. In India, I do not believe it could be one third but considerable correction is quiet possible. Do not buy stocks for long term investment for some more time.

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