Singapore’s 4Q08 GDP was much weaker than expected, contracting by 3.7% year-on-year and 16.9% against the preceding quarter. On this note, the forecast for 2009 GDP was revised downwards drastically to a range between -2% and -5%. China’s performance was also marginally below expectations. Their 2008 GDP growth slowed to 9% from 13% in 2007.

With such bleak economic outlook and concerns over weaker than expected result announcements, retail investors will likely remain in “caution” mode, creating a potential liquidity issue. “Shortists”, a group of traders who likes to sell short stocks, will return to the market after key events like Obama’s inauguration and Singapore Budget announcement.

In line with the focus of Singapore’s “Resilience Package”, sectors in play will be property, reits, banks, transport and healthcare. A possible short term trading play in such market is to buy when results are below expectations and vice versa.

Mid Term Outlook:

Consumers’ confidence, which we believe is a key driver for economic health, has remained relatively resilient in light of current economic turmoil. Actions and words by political members, together with the assistance of smart media tactics play a part in supporting such confidence.

There is a possibility, if not certainty, that occurrence of certain negative events in the near future will serve to break this support resulting in “capitulation”, a term for sharp plunge in share prices due to extreme fear in the stock market, marking the trough of this mother bear.

We will like to draw out a potential trigger event where the US sub prime financial tsunami finds its way out to the shores of the Asians. That, if should happen, there shall be a switch of attention to Asian victims as the former fades into the background towards gradual recovery.

Until then would we be confident to deduce that we have reached the finale of the dire episode of this entire catastrophe and survivals will live to see the birth of the new era where values surface over the dead bodies.

Investors may want to focus on sectors which will benefit from the recent S$20.5b stimulus package (Singapore), namely property, reits, banks, transport and healthcare. Sell into strength.