Markets are Rebounding

Markets have started to rebound from the prior two weeks when the triple disasters in Japan were very much in the limelight. Actually, its not that overnight, there is no more danger of a radiation leak from that stricken nuclear reactor in Japan. Its just that after two weeks of worrying over the aftermath, waiting to see what happens, investors have come to the realization that while Japan continues to grapple with that nuclear power plant, life still goes on.

The key thing is that other parts of the world, and indeed, even other parts of Japan doesn’t come to a standstill just because there is a possibility of nuclear radiation spreading from the confines of the Japan power plant. People are still buying cars, electronics, going on holidays (even if they give Japan a miss for now), and going to work. Even in Tokyo, life goes on, though the rationing of power has admittedly affected some of the bustle there.

We are now seeing a rebound in markets as people reconsider the impact of what has happened in Japan. While admittedly it’s a tragedy, they are realizing that outside of Japan, any financial and economic impact is surprisingly minimal. Some areas or industries might even see additional business. Take for example Singapore tourism arrivals. The February tourist arrivals rose 15.4% to hit a record high of 990,000 (source Singapore tourism board). And the tourism board is expecting 12 to 13 million tourism arrivals in 2011. Did they come out with a revised down figure now in the aftermath of the Japan quake? No, they didn’t because if you are planning to visit Singapore, what happens hundreds of kilometers in a Japan power plant is hardly going to change your mind. In fact, some people who planned to visit Japan, may decide to visit somewhere else instead, and its possible they consider Singapore as well.

I think the outflows from Asia to the US, and the triple disaster in Japan has resulted in a previously overly bearish mood amongst investors in Asia. From a global standpoint, Asia has actually gotten more attractive, because valuations are still cheap, the growth remains high, and now one of our biggest export markets US is also picking up steam in its recovery.

For the Singapore STI index, I believe 3,600 is still within reach for end of this year and we haven’t changed our forecast for it to hit 4000 points by end of next year. Too bullish? Let’s wait and see. I think many Asian markets will surprise investors with their strength this year.