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Asean markets face uncertain week
Political protests in the world's leading oil exporter, Saudi Arabia, and the aftermath of the largest earthquake on record in Japan will dominate trading early in the week.
Protests in Saudi Arabia were more muted than what some had anticipated on Friday. Concerns arose that the planned "Day of Rage" protests in the country could lead to further instability in the Middle East and North Africa.
The massive earthquake and deadly tsunami in Japan, a top energy consumer, hit other markets hard on Friday.
It triggered an increase in risk aversion, with nervous Japanese liquidating investments overseas and bringing capital back to yen-denominated assets.
The S&P 500 is trading below its 50-day moving average and is within reach of significant support at 1,275, a low touched in late January. If it goes to 1290 it is time to buy large positions.
For the week, the Dow Jones industrial average fell 1 percent, the S&P 500 slid 1.3 percent and Nasdaq lost 2.5 percent. Besides a break below the 50-day moving average earlier this week, the S&P 500 fell below a long-standing trendline, suggesting the benchmark index has lost momentum and that the recent rally may be losing steam. I however think that this is a healthy pause to refresh and the markets will push forward.
These big dips are an excellent oppotuntiy to build your dividend portfolio, investors should be looking to add positions in Seadrill Limited (NYSE:SDRL), Chimera Investment (NYSE:CIM), American Capital Agency (NASDAQ:AGNC), Teekay Tankers (NYSE:TNK), Partner Communications (NASDAQ:PTNR) , Vector Group (NYSE:VGR), Alaska Communications Systems Group (NASDAQ:ALSK), Grupo Aeroportuario (NYSE:ASR) , Pennantpark Investment Corp (NASDAQ:PNNT) and Navios Maritime Partners L.P. (NYSE:NMM).
The uncertainty of events will make investors increasingly cautious this week. The recent falls on Wall St. sparked a new media fear that a correction is near, however, stocks recovered on Friday from early losses to finish the day higher with the Dow back above 12,000 and the S&P 500 back above 1,300. This gives me confidence in buying on any large dip we see that is event triggered.
The strong bull run remains intact from the start of September, with the S&P 500 still up 24 percent for that period, but has faltered in the last two weeks. At Friday's close, the Standard & Poor's 500 Index was down 1.3 percent for the week.
The jump in crude oil prices to 2 1/2-year highs has raised anxiety about their dampening effect on the economy.
Given those concerns, investors will be tuned into any comments on energy from the Federal Reserve when it releases a statement following its policy meeting next Tuesday.
European Central Bank President Jean-Claude Trichet warned last week about inflation risks, and surprised investors by saying the bank may raise interest rates as soon as next month.
The US central bank is unlikely to hint at policy changes next week, and is expected to keep interest rates near zero.
Next week also brings readings on inflation in the US Producer Price Index and the US Consumer Price Index, as well as data on industrial production.
HCM has said “Low rates will prevail in 2011 and in looking for an alternative”, he added “we expect to see a shift to more funds, managers and institutions buying dividend stocks in 2011.”
Dividend stocks will have their best year in decades this year so try to get in early.
What we are looking for here are 10 companies with a long history of dividend payments, a strong outlook and a low PE ratio, By using this criteria you can minimise your downside.