Correction in global stockmarkets

VIEW FROM CHIEF INVESTMENT OFFICER, NTUC INCOME

Global stock markets corrected over the past two months due to concern for inflation and uncertainty in interest rates in the USA. The correction was more severe among the Asian markets than the USA and European markets.

Economic growth and corporate earnings are expected to slow in 2006 and 2007. There are concerns that higher interest rates could result in further deterioration in growth over the next two years.

We think the markets are fairly valued now after the correction. Expected growth of the global economies and company earnings is generally reasonable, and markets are more attractive now. It is premature to conclude that growth will slow significantly.

Investors have over-reacted to the concerns for inflation. The correction was exaggerated by selling and unwinding of leverage positions by hedge funds.