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Goldman Sachs vs Morgan Stanley on Market Dips, and 3 Defensive Stocks to Buy
Aspire, Hot Picks | 21 September 2015
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By: Lim Si Jie
Articles (169) Profile

Is it time to buy the stock market dip? Two of the most high-profile investment banks, Goldman Sachs and Morgan Stanley, don’t quite agree with each other.

Morgan Stanley: First Full-House Buy Signal Since 2009

Morgan Stanley recently issued its European equities report in which its market timing indicators (MTIs) showed the first “full-house buy signal” since the credit crisis started hammering euro zone stocks. According to Morgan Stanley’s Graham Secker, the “full house buy signal’ is the first since January 2009.

China: 7 Percent Growth Is the New Norm

China’s National Bureau of Statistics revised down the 2014 gross domestic product (GDP) growth from a previously reported 7.4 percent to 7.3 percent. This underscores a deepening economic slowdown that’s threatening to put the 2015 growth target of about 7 percent out of reach.

According to Dariusz Kowalczyk, senior economist and strategist at Credit Agricole, “China revises growth data every year, but it’s usually upwards. It is unusual that the 2014 revision was downward.”

Chinese Finance Minister, Lou Jiwei, stated that China could no longer rely on policy supports to achieve 9-10 percent growth, as it might already take several years to digest excess industrial capacity and inventories.

With China heading for its slowest economic expansion in 25 years in 2015, mainland markets have slumped 40 percent since mid-June, sending global financial markets jitters.

Morgan Stanley: European Market Less Volatile with Foreseeable Slight Growth

Morgan Stanley believes that the panic around emerging markets sparked by concerns about the China economy will see an influx of investments into safe havens like the European market as investors seek less volatile environments.

Interest in developed markets has been stronger than that in emerging markets for the last couple of months not only because of extreme turmoil, but also because there had been some signs of growth in Europe.

The possibility of the European Central Bank (ECB) extending its quantitative easing program beyond the putative deadline of 12 months’ time could be another incentive to invest in the euro zone. The ECB started bond purchases this March under its 1.1 trillion–euro (USD 1.2 trillion) program of bond purchases.

Goldman Sachs: Bullish, But Caution Advised

However, in contrast to Morgan Stanley’s buy call on developed markets, Morgan Stanley’s long-time rival Goldman Sachs, urged for caution.

Sheila Patel, CEO of International Goldman Sachs Asset Management, is optimistic towards the performance of some equities but advised investors to remain selective. While Goldman Sachs is bullish on equities in general, there is an emphasis to be particularly selective and look for the companies whose valuations have been battered in the recent volatility, and yet offer promising prospects.

Investors Takeaway: Buy Defensive Telco Stocks With Good Yields

For the June quarter, the three local telcos reported results that were mostly in line with analysts’ expectations. The overall mobile market continues to remain stable, with post-paid subscribers inching up another 0.8 percent QoQ.

4G subscribers now constitute 68 percent of all mobile subscribers in Singapore. The three telcos continue to be optimistic about rising data usage and further improvements in average revenue per user. The main mobile business should do relatively well even in an increasingly uncertain economic environment.

Si Jie is no stranger to investing having started his journey at a young age. He is heavily influenced by acclaimed investors such as Benjamin Graham, Peter Lynch, and John Rothchild.

Please click here for more information about this author.

Singtel  3.170 -0.01 -0.31%   
Business: Asia's leading communications group. [FY19 Turnover] Mobile Comm (31.1%), Data & Internet (19.2%), Infocomm Technology (17.5%), Sale of Eqmt (16.5%), Digital Biz (7.2%), Fixed Voice (5.2%), Pay-TV (2.1%), Leasing (0.8%), others (0.4%).

Insight: May-19, FY19 operating revenue remained flat at $1... Read More
StarHub  1.320 +0.020 +1.54%   
Business: [FY18 Turnover] Mobile (34.9%), sale of equipment (22.4%), enterprise fixed (21.6%), pay TV (13.2%), broadband (7.9%).

Insight: May-19, 1Q19 total revenue rose 6% to $596.8m attr... Read More

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