STI Hitting 9000 in 2012??!!

The principle behind technical analyst David Bensimon's accurate forecastslies in the symmetries in markets, reports GENEVIEVE CUA - BT

MAKING forecasts is a tricky business, as many analysts and fund managers will tell you, but it does not faze technical analyst David Bensimon. Some of his calls on the markets have been so precise that on one of hisspeaking engagements, it spurred an impromptu bidding war among some in the audience for an on-the-spot copy of his award winning tome on markets, Polar Perspectives.

Mr Bensimon: Asia is in for a prosperity-driven inflationary era

One of the bidders paid for his copy with a gold coin. Worth about US$700then in November, it was about equal to the price of the book. But the coinhas since appreciated, as Mr Bensimon notes with amusement.
The book last year won a gold medal as the 'best book in finance/investment/economics' at New York's annual independent publishers awards.

Mr Bensimon's fundamental view is that most of the world - Asia inparticular - is in for a 'prosperity-driven inflationary era' over the nextfew years, notwithstanding the jitters over the credit crisis. Hislong-term view, for instance, is that the Straits Times Index (STI) willhit 9,000 and the Hang Seng Index 100,000 by 2012; and gold will climb toUS$2,600 an ounce by 2014.

He has set up a fund to invest according to the themes of his book. One ofhis first investors is Stephen Riady of the Lippo Group.
His forecasts may sound quite incredible, until you learn of his near-termcalls on markets which have turned out uncannily right. Last October, forinstance, he told an audience in Singapore that the STI would fall 15 percent from its level of 3,900 then to 3,300 shortly. The index fell from3,906 to 3,306 within six weeks of his call. In The Business Times inAugust, Executive Money quoted him as saying that the STI would fall to2,800; the index was then at 3,300. It fell to a low of 2,866 in January.

The principle behind Mr Bensimon's calls lies in the proportionalities andsymmetries in markets, which he sees as functions of 'phi', also called the'golden mean'. This is expressed in the number 1.618 and its inverse 0.618.As he sees it, these symmetries permeate markets, and this is evident inthe scale of market rises and even in the pattern of retracements acrosstime. His calls have gained a following among banks, traders, hedge fundsand private individuals.

The outcome of a forecast, he says, is not cast in stone but is based onprobabilities. 'The power comes not from saying that markets will do thisor that. It comes from recognising that different alternatives can unfold,'he says. 'The benefit is not to say the market might go up or down, that'snot of value to anyone. The value comes from being able to say that if themarket chooses this northward path, it will go this far and no more. If ittakes the southward path, it will go this far to a target.

'My speciality is to provide clients with a magnitude of duration and time,of price and specific levels and dates . . . March does provide a broadturning point that crosses different markets, not just the STI or equitiesbut across a spectrum.'

He believes the STI, currently trading at the 3,077 level, could still faceyet another downdraft. It needs to exceed 3,300, he says, to confirm thatit is out of the woods. Until then, there is a 'distinct risk' that itcould fall another 15 per cent to 2550, which will be a buying opportunity.'In Singapore if we break the 2,850 level, the next level down is 2,550which seems a little far and rather cheap. But these motions are driven bypanic and over-extension on the downside. But I'd be happy to investanywhere from 2,800 to 2,600 because at those levels, it's really verycheap.'

He said: 'One of the benefits of looking at the very big picture history isthat it provides a degree of comfort and confidence that when we are in acorrective mode, instead of being worried and panicking, we can becomfortable that we know what the rhythm is and can recognise therelationships. We know we'll get to the ultimate target of 8,800 or higherseveral years from now, and there are natural levels to re-enter themarket.'

His view is that Asian markets - Australia, Shanghai, Singapore and inparticular, Hong Kong - will move in synch upwards. 'Asia will benefit fromthe huge fundamental growth and prosperity sweeping across the region, that is not in any way harmed by the slowdown in the US. Asia now has enough internal demand and intra-Asian trade and infrastructure and consumer spending that it has a life of its own.'

He notes that historically, in past US recessions, the stock market hasanticipated a recovery and rises well before the recession ends. 'There isno impediment to have markets bottom in March, and have them recoversharply even if a recession technically continues in the next few months.'
His views on oil and gold are positive but not equally so. He expects oilto reach US$125 a barrel this year and to move sideways for two years.'We're still en route to US$125, but the big story is that once we reachUS$125, everyone will scream that we're on the way to US$200 and that's not what's going to happen. '

The catch, too, is that consumer prices will not be adjusted downwardsduring the consolidation period. 'The margins for products will be fabulousand will power the stock market to much higher levels because the reduction of the oil price will translate directly into the bottom line forcorporates in the industrial and financial sectors, telecom and blue chips.They'll all be lifted by prosperity.'

He is bullish on gold in the long term but expects some consolidation thisyear before it moves to US$1,030 an ounce in 2009, and eventually US$1,220 in 2010. But the most rapid rise is expected between 2011 and 2014 when he expects the price to hit US$2,600.