'Global bourses to rebound in short term'

SINGAPORE: The global share markets are likely to see a rebound in the short term despite the volatile expectations over the next few months, said Shane Oliver, Head of Investment Strategy and Chief Economist of AMP Capital Investors.

He said the past week has seen the usual post-summit letdown in Europe with general scepticism regarding whether the latest European Union summit would achieve much in terms of stabilising Europe’s debt problems, let alone be implemented.

"Our view remains that only the European Central Bank can stabilise the eurozone bond markets by stepping up its bond purchases directly and providing aggressive monetary easing as an offset to debilitating fiscal austerity," he said here today.

Oliver said investor sentiment was not helped by the latest US Federal Reserve (Fed) meeting which saw the Fed referred again to significant downside risks to the economic outlook but failed to offer any new stimulus, not that it was ever expected to at this meeting.

"The good news though is that global economic data releases were if anything a bit better-than-expected, notably in the US and the US Congress appears to be stumbling towards an extension of payroll tax cuts (that expire at year-end) and a spending bill necessary to avert a government shutdown.

"Thanks to dodgy policymaking and political intransigence in Europe, share markets are likely to remain volatile over the next few months. But, in the short term there is some chance we will see a bounce in share markets," he said.

Oliver said the period from mid-December into early January was normally strong for shares as the Santa Claus rally clicked in on the back of optimism about the new year, against a backdrop of low trading volumes and little capital raising.

He said Australian shares may also benefit in the run-up to year-end by significant dividend payments and payments from recent takeovers.

He noted that the Chinese economic data were mixed over the last week with slowing growth and short-term policy uncertainty leaving investors nervous about a hard landing.

"Our assessment remains that Chinese policy easing will accelerate in the months ahead and that this will provide a strong boost to the share market given that valuations have become very attractive," he said. -- Bernama