Hi everyone, I am Jackie, a house dealer from Phillip CFD department.

Generally, January has been a very good month so far across the world. Dow gained 0.48%, the S&P 500 added 0.36%, Shanghai Composite back above 2,300 points, Hang Seng Index climbed to a three-month high up to 0.8% back to 20 000 points and Singapore advanced 1.5%.
There has been a lot of optimism, but is this rally going to last? Today, I'll give my view on the recent rally, and what lies ahead in the near future.
Over the past 2 weeks of January 2012, we’ve seen that the Asia markets rallied strongly due to the strong earnings and positive jobs data of the US. These data added to hopes that the economic situation in US is not as bad as feared and that the nation is on its road to recovery.
Encouraging developments from the Euro-zone too gave a lift to sentiments in the region as France sold more debts than expected despite the S&P downgrades. This goes to that that there are some grounds for optimism in investors.
All these news currently offer glimmers of hope but there are still more far-reaching issues to be addressed. One of the biggest challenges inevitably remains on the Euro-crisis and the possibility of sovereign debt defaults in Europe. And, in 2012 would be a volatile presidential election year for investors as well.
Greece, for example, had agreed that elections would be tentatively scheduled on February 19, 2012 which determines that the New Greek government is to carry out the bond exchange to reduce the country's debt. There has been recent news earlier this week over the prospect of a disorderly default of Greece weighed on sentiment. If Greece defaults, it would have a major impact on the euro as it would spread contagion to other bond markets in the euro zone.
Next for France, which is one of the countries beside Germany playing a leading role in resolving the euro zone sovereign debt crisis, may face a number of challenges in the coming months. For example, the possible need to provide additional support to other European sovereigns or to its own banking system, which could give rise to significant new liabilities for the government's balance sheet. With this, Moody’s warned that they might start a review of France’s credit worthiness due to the growing crisis bill and the country’s economic outlook.
Finally, two driving forces in the Euro-zone have differing views on what direction the Euro-zone should take, will have a catastrophic impact on the region. This is because German officials said that Eurozone needed to find a solution for Greece that makes the country able to repay its debts in the long-run. France on the other hand has been reluctant to back bigger losses for banks, since French banks are among the biggest holders of Greek government bonds.
In conclusion, while things are looking better in the US, there seems to be some positive development in Europe but the truth is, the solution to the root of the problem will not be that easy, and it is the main reason why the market experts remain to be cautious about 2012 despite the recent rally.

So what should you do as an investor/trader?

Given the current market condition while valuations are attractive at the moment, if you are taking a long term view, be aware that there are huge uncertainties ahead, which may make seemingly cheap valuations even cheaper. If you wish to take lower risk, then high dividends stocks may be good to look at, given the attractive yield current prices present and also the high possibility that low interest rate environment may stay for a while.

Those who are looking for short term trades, be nimble in your trades, and exercise cut losses strictly. Although sentiments are still bad with regards to the Eurozone, any surprise on the upside will be quick and significant.

That is all I have for today for this week’s market watch. Thank you for staying with us.