EU debt woes and China's credit tightening and potential re-capitalisation of its banks caused Asian markets to decline yesterday....Singapore was one of the worst hit among Asian markets.  Overnight, we saw sharp declines in US and EU markets again on concerns about the worsening EU debt crisis.  Although Greece has already agreed on a debt restructuring plan with the EU and IMF, this has led to civil protests which the "bears" take to me that it will need more refinancing down the road.   There is also a growing fear that the debt problems will spread to other PIGS which in total will be about 3.7% of world GDP.  Of the PIGS, Spain s the biggest at 2.4% - the other three are tiny.  So unless Spain cracks - which their Prime Minister has denied, then we might see a slightly bigger ripple effect.  Again the quantum of the amount to rescue is small relative to what was needed to save or rescue some of the US corporates.

So its probably just an excuse for investors to take profit and more so institutional investors.  The decision by New Centiury to withdraw its Singapore IPO probably means that the international book building was weak.....not surprising given the volatile global markets.  The other possible reason is an impending re-capitalisation of Chinese banks to meet new capital requirements which may such some liquidity out of the system.  Blue chips are likely to see more selling pressure in the coming weaks as the volatility starts to rise....keep a look out for the VIX.

One investor called me yesterday and said that market sentiment is weak and he is taking some money off the table.  Others are sitting on the sidelines waiting for a better buying opportunity.  I think this volatility will pass and by July/August, markets should resume their uptrend.  I have intentionally only focussed on recommending stocks with strong balance sheets, low PERs (from good earnings) and attractive dividend yields for my portolio (Stock Picks).  So if you dont want to trade, I think you can sit it out.   But bear in mind that everything falls in a weak market but on low volume so dont panic as your investments are backed by sound corporate fundamentals.  There could even be an opportunity to average down.

 If you have trading or concept stocks in your portfolio you may want to lighten on these as trading sentiment is likely to dampen such stocks over the next few weeks as short term trading liquidity moves to the sidelines.