LONDON, England– In the past week, investor sentiment has turned decidedly more positive. On Monday, the Standard and Poor's 500 Index hit an eight-month high. Better than expected earnings from Goldman Sachs in financials, to Intel in tech, to Caterpillar the biggest maker of earth moving equipment, have all helped push the market higher.
Investment banks are raising their year-end projections for the S&P 500. Credit Suisse is advising clients to cut their bond holdings and buy stocks, reversing their advice from June. The bank has raised its year-end guidance for the benchmark index by 14 percent to 1,050, citing better earnings and economic conditions.
Goldman Sachs is also turning more bullish. It has a year-end target of 1,060 for the S&P 500. "Improvement in ex-financial earnings per share, stabilization in profit margins and higher forward EPS guidance all point to a rising market through 2009," its chief U.S. investment strategist, David Kostin wrote this week.
He also raised his 2009 and 2010 earnings estimates for the S&P 500 companies to $52 a share and $75 a share, substantially higher than his previous estimates (a 30 percent increase over his previous 2009 estimate and a 19 percent increase over his previous 2010 estimate.)
However, Kostin is hedging his bets, saying the biggest risk to his forecast is the possibility of a prolonged economic slump.
He also points to budget cutbacks from state and local governments, a higher savings rate, and a weak housing market as keeping consumer and business spending in check.
Goldman is among the most bullish of Wall Street investment banks on equities. Others include JP Morgan which has a target of 1100 year end for the S&P 500. At the other end of the spectrum, HSBC and Morgan Stanley both have a target of 900.
The S&P 500 has risen some 40 percent from its March low, and if the bulls are right, the rally has further to go. So far, some 79 percent of S&P 500 companies have beaten earnings forecasts, the best showing since 1993.
For the rally to continue, companies will have to continue to beat forecasts, and investors will have to remain confident that the economy will continue to improve.
Do you think the rally has come too far too fast?
JAKARTA, Indonesia – Noke Kiroyan enjoyed attending the regular CastleAsia business breakfast at the Marriott in Jakarta. It was a good place to network, and he liked the attentive service: The waiter always remembered his preferred simple breakfast of two eggs.
Security is always an issue in Jakarta. Everyone knows that the country’s most notorious terrorist, Noordin Top, is still at large and has a long track record of bombing hotels, embassies and nightclubs. But the Marriott seemed a secure location – bags were checked and everyone passed through a metal detector upon entry. Last Friday, the Indonesian and expatriate executives gathering there felt no cause for alarm.
But as Noke – a Jakarta business consultant and former CEO of several multinational companies in Indonesia – chatted with fellow business leaders at breakfast, two suicide bombers were making their last checks in room 1808. One descended in the elevator and walked straight toward the lounge where the Castle Asia meeting was taking place. A more obvious target might have been the busy coffee shop nearby, but the bomber had his eyes fixed on the lounge, as he wheeled a suitcase packed full of explosives.
What happened next Noke will never forget: a loud bang, a red flash and then darkness. He regained consciousness, unsure if he was dead or alive. He saw nothing, the void pierced only by the groans and prayers of the others around him. Then as the dust settled, he saw a beam of light. He stumbled towards it. Staff grabbed him and helped him out onto the sidewalk, where he saw a friend from the meeting who’d also escaped.
A brief thumbs-up and a few words in Dutch confirmed they were both okay. But others weren’t so lucky. Three Australians and a New Zealander were among the victims, as was the Indonesian chef serving them breakfast. The police are still working out exactly what happened, but it is becoming increasingly clear the CastleAsia meeting was deliberately targeted.
Experts like Sidney Jones from the International Crisis Group, say it’s not clear if the terrorists knew about the regular Friday breakfast meeting well in advance or whether they learned about it after they’d checked in as guests days before the attack. Either way, it would have been an enticing target for a terrorist cell determined to kill as many Westerners as possible.
Not just any Westerners either; these were the elite of the business world in Jakarta. CEOs, diplomats, movers and shakers were regulars at the CastleAsia meeting.
Noke says he does want to continue to attend CastleAsia meetings, once its founder James Castle has fully recovered from his injuries. But Noke admits the venue will have to change. Even a hotel bristling with security is still too open, too public now.
The way business is done in Jakarta will have to evolve, too. One man who runs a similar networking company, James van Zorge, told me that for now they may have to meet “electronically” via Skype or video conferencing until confidence returns. And then perhaps the networking and social events will have to take place in private residences – almost in secret to ensure the terrorists can’t hit them again.
Expatriate businessmen interviewed say they are determined not to leave Indonesia. But until Noordin Top is caught, many feel holding a regular, meeting of Westerners in a public place is simply too risky.
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