Unfortunately, they are now also blamed by the market for testing the Eurozone unity.
Growing concerns about their deficit and concerns (i stress the word "concerns") about their inability to service their debt is rattling capital market worldwide. Technically, none of these countries has actually defaulted on their debt or raise issue repaying their debt.
The heart of the problem here is not so much as of their debt, but the question is on the overall unity of the Eurozone members and the political willingness of the bigger players (Germany and France) to bail out their poorer neighbours in time of need.
With the world just on its recovery path, and European economies still struggling to find it footing, the financial market pirate (if you believe in the financial world conspiracy theory) saw a candidate ripe for some plummeting. This is especially so with the Eurozone just undergoing a recent transition of new leaders and, not to mention, an European Central Bank president, Jean-Claude Trichet, which many views as inept..(looking at his recent statement that EU will never bail out Greece...I tends to agree with this view)...the market is testing the theory that EU will have issue coordinating a rescue of their own version of a major financial crisis.
So what does this got to do with Asia...or even the US? Well, there is always the contagion effect theory. However, from lessons from the Asia Financial Crisis, and the recent US Sub-prime meltdown...I believe the key impact will still be on ground zero.
Yes any crisis in Europe will definitely further slowdown the recovery process, but PiIGS ultimately is not US, nor France, nor Germany and hence I do not see this having a key economic impact on Asia recovery.
OK...the Euro may be vulnerable you may argue. But it is almost unimaginable that Germany and France will actually allow the pride of Euro to go into tatters...even thou politically they will not say so.
The pirate will keep looking for bad news to short the market after the run up in stock prices since march 2009, but I am betting on this as a correction rather than a return of the real bear market for now.
I have attached here a revised chart of DJIA, HS and STI showing their respective support levels. Looks like there will still be some downside ahead, but I still see the market to be supported until the major trendline is broken.
2010 will prove to be a volatile year...and only the brave and nimble will prevail.
This blog is a selections of my investment views to my client. If you find it useful or have additional information to share, please do let me know. These blogs are my personal views and is not meant to solicit any sales or investment on any securities or investment. I may have vested interest in some of the counters or investment products, hence please invest at your own risk. As usual invest in what you understand and do your own homework as usual.
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