GLOBAL SHARE MARKET TO CONTINUE UPTREND DESPITE HIGH VOLATILITY, SAYS ECONOMIST

By Tengku Noor Shamsiah Tengku Abdullah

SINGAPORE, April 23 (Bernama) -- The global share market will continue its uptrend despite the high volatility, says Dr Shane Oliver, Head of Investment Strategy and Chief Economist, AMP Capital Investors.

He said ongoing worries about public debt, high oil prices, Japan and China's tightening would no doubt keep volatility high in the share markets but on a broader assessment, shares were expected to continue their climb upwards.

There is still help from cheap valuations, the continuing global economic and profit recovery and easy global monetary conditions, he told Bernama.

Shane said the focus on US public debt intensified last week with
ratings house Standard and Poor's putting the US Government's AAA sovereign credit rating on negative credit watch.

He said this basically indicated that if a meaningful deficit reduction plan is not agreed to in the next two years then its credit rating will be lowered.

"Both sides of politics in the US know they have to do something
but are split over how much to rely on spending cuts versus tax increases.

"The issue is clearly heating up though with the next battle being over the need for Congress to raise the US Government’s debt ceiling. Ultimately it will, but Republicans are likely to extract more spending cuts in the process," he said.

Will the talk of a downgrade in America’s public debt rating be bad for US bonds? Shane said: "No, in fact it wasn’t with US bond yields actually flat over the last week with investors adopting the view that fiscal austerity is on the way and that this will constrain economic growth and keep the Fed on hold."

After a poor start to the week as a result of Standard and Poor's putting the US on negative credit watch, Shane said shares rebounded on the back of good economic and earnings news in the US and Europe.

He said Australian shares were helped by good sales reports from various retailers suggesting that consumers may be becoming a little less cautious and a good production report from BHP Billiton.

In the US, the March quarter earnings reporting season will remain a key focus with another 150 or so companies due to report.

On the data front the highlight in the US will probably be March quarter GDP growth due for announcement on Thursday. "We expect growth of just 1.8 per cent annualised as a result of soft data for exports and inventories."

In Japan, March data for industrial production, retail sales, employment and inflation will be watched closely to gauge the impact from the earthquake.

The Bank of Japan also meets on Thursday but is expected to leave monetary policy unchanged.