· The stock market looks expensive and it may not be equipped to handle rising interest rates, according to Yale University fellow Stephen Roach.
The former chairman of Morgan Stanley Asia suggests Wall Street has a case of amnesia, and the prognosis is poor for the 8½-year-old rally.
"The markets are frothy, and it's a froth again that strikes me as reminiscent of what we saw in a lengthy pre-crisis period in the 2003 to early 2007 period," he said. "I think the one lesson we learned from that crisis is that financial stability addressing frothy markets with a more normal, tougher, disciplined monetary policy is not such a bad thing."
According to Roach, the odds are higher than 50-50 that stocks will plunge as much as 10 percent in the final months of the year.
Roach said the catalyst could be anything from a North Korea strike to unexpected weakness in the U.S. economy.
· Asian shares regained some poise on Friday after a tough week in which the gathering risk of a U.S. rate rise lifted Treasury yields toward nine-year highs and left the dollar on track for its best week so far this year.
MSCI’s broadest index of Asia-Pacific shares outside Japan bounced 0.4 percent, but was still down 1.7 percent for the week so far. For the quarter, it looked set to gain 4.7 percent.
· Japan’s Nikkei share average ended almost flat on Friday but posted its biggest monthly gain this year as investors rebuilt positions they had scaled back earlier this month on geopolitical concerns.
The Nikkei was down 0.03 percent at 20,356.28 but posted a solid 3.6 percent rise in September, its first monthly gain in three months
· China stocks were firm on Friday, buoyed by hopes of further reforms to the mainland’s state-owned enterprises and by consumer firms as investors bet shoppers would spend big during the upcoming week-long National Day holiday.
The blue-chip CSI300 index rose 0.4 percent, to 3,836.50, while the Shanghai Composite Index gained 0.3percent to 3,348.94 points.
· Hong Kong stocks ended higher on Friday, but the benchmark index posted its first monthly loss this year, an indication the market’s upward momentum may be slowing amid worries over U.S. monetary tightening and a China economic slowdown.
The Hang Seng index rose 0.5 percent, to 27,554.30, but posted a 1.5 percent loss for September - its first monthly loss in 2017 - reducing this year’s gain so far to 25 percent.
Reference: Reuters,CNBC
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