The negative news continues to emerge both in the macro economic area as well as corporate earnings.   The US numbers continue to disappoint and President Obama's rescue package is facing difficulty....maybe it isnt so easy to manage even if there is a belief that CHANGE is required....after all old habits die hard.

For Singapore, we have just seen our Government revise down its GDP forecasts for 2009 from -2% to +1% to -5% to -2%.  With this adjustment, we see the Finance Minister announcing stimulative Budget which is now being actively debated in parliament.  I am glad to see that many MPs are asking questions about the reserves, about why previously tested policies for crisis have not been used before trying new ones and about the process that led to the use of previous reserves.   I will not focus on this and let our paid representatives do their job by asking questions which their constituents want them to ask.....this is good and will lead to increased accountability.

I was more shocked to read a report from an International/Institutional broker that is now forecasting the Singapore economy to contract by 10% in 2009.  This is twice the rate of decline of the low end of the Government''s current forecast.  Let me briefly summarise the key points of thier report:

a) dramatic slowdown in consumption started in Q4-2008 and although there is a huge stimulus package on the table - most of the fiscal bullets will be saved not spent

b) fixed investments to record double digit declines in 2009 as the world grapples with massive over capacity of fixed assets

c) Singapore to see another 20% decline in exports and imports in 2009

d) massive exposure to the cyclical sectors of property, trade and finance - the three pillars of our economy will result in a 10% decline in GDP growth

This is by far the most pessimistic forecast I have seen for Singapore so far for the economy. If we look at the optimist - they believe that China, India and to a lesser extent Brazil will help Asian cushion itself from the Global meltdown.  Looking at the recent news on the Chinese economy - I think this theory wont hold - mainly because of the Globalisation.   

If we translate the -10% GDP growth for Singapore back to the stock market, its not inconsistent with my view that the there will be a lot of bad news into Q2-2009 when companies report their Q1-2009 earnings numbers.  1200 for the FSSTI when we are facing -10% GDP growth may eventually prove to be too optimistic - although I think that at 1200 - there will be bargains and we cant always expect to BUY at the bottom.    Fiscal measures even those taken by other Governments need time to be spent and also time to flow through the economy.....by then it probably be the end of 2009  - Q4-2009 is currently the time period that I am looking at for investors to start slowly putting money back into the stock market - for medium term (2-3 year) return horizon.