Actual Q2 real GDP growth was -3.5% YoY, better than the flash estimate of -3.7%. Consensus expected a downward revision following weak manufacturing production figures for June. Both private consumption and investment are still down 3.7% and 7.2% YoY, respectively, but less than the -4.2% and -15.1% in Q1, implying sharp seasonally adjusted increases on the quarter.
For Q209, 50% of stocks (by market cap) reported higher than expectations versus 10% below. Sectors that reported meaningfully higher- than-expected results were banks, offshore, media, healthcare, and commodities. Meanwhile, primary residential sales set a new record of 2,767 units in July.
The FSSTI has risen 80% from its trough in March. The speed and magnitude of the market collapse and the subsequent rally is reminiscent of the Asian Crisis. Between Sep 98 and Jan 99, the index rose 90% and gave back 35% of the gains over three weeks, before resuming the rally. This time, if history is repeated, giving up one-third of the gain would lower the FSSTI to 2,280. We remain positive on a 12-18M view. We believe policy tightening is unlikely, growth is not due for a double-dip, and valuations are not unduly dear. Incorporating EPS upgrades and rolling our target to end-2010, we see the FSSTI at 2,960 by end-2010.
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