Caution is critical, but bulls still lead the charge

by Zubin Driver
May 20, 2009

The spring rally that has pleasantly surprised so many of us seems to know no bounds. The new term constantly being repeated in the media is 'green shoots,' used to refer to small hints of life and growth emerging from the wreckage of the financial crisis. Suddenly, the green shoots seem to be reaching the fairy tale heights of Jack's beanstalk, as equity markets that looked ready to crack by last week have rallied sharply to open this week.

How will things look when this momentum (inevitably) slows down? Will there be a significant selloff and return to panic? Or will the summer doldrums just consist of sideways consolidation before marching higher in the fall? The answers to these questions will likely be determined by whether economic data continues to improve or slips back to dismal levels, and over the longer term, whether private sector demand picks up once governments have exhausted their ability to spend the economy out of recession.

Manmohan!

In the fall we heard about markets potentially closing if they traded 'limit down,' that is, if they traded down too far in one session, the market would halt and close for the day in an attempt to quell the panic. On Monday India's Sensex was halted after it traded to its upward limit, up 17% on the day! This massive rally was in response to the election victory of Manmohan Singh's Congress Party, who won 261 out of the 543 seats available, its largest seat count in almost two decades. Congress now has enough seats to push through its market friendly agenda, in terms of further opening India's markets to foreign investment, increasing stimulus, and reducing debt by selling some national corporate assets. Developing countries' economies play a key role in leading the world back to a growth trajectory, and Mr. Singh's victory boosts confidence that India is up to the task.

Quality IPOs at the bottom of the market

As discussed last week in this space, if the market is bottoming and the worst behind us, now is a great time to participate in quality new deals that are priced in the buyers' favour. Commodities, green technologies, and revenue generating deals are all areas that are offering excellent opportunities. I am currently accepting orders for two IPOs in these spaces, and encourage investors to contact me and learn more.

Best regards,
Zubin

Zubin Driver
Investment Advisor
(W) 604 643-7608 / (F) 604 643-7606
Email: zubin_driver@canaccord.com

Canaccord Capital Corporation
Attention: Zubin Driver
P.O. Box 10337 Pacific Centre
2200 - 609 Granville St.
Vancouver, B.C. V7Y 1H2

This newsletter is solely the work of the author for the private information of clients. Although the author is a registered Investment Advisor at Canaccord Capital Corporation (“Canaccord Capital”), this is not an official publication of Canaccord Capital and the author is not a Canaccord Capital analyst. The views (including any recommendations) expressed in this newsletter are those of the author alone, and are not necessarily those of Canaccord Capital.

The information contained in this newsletter is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it do the author or Canaccord Capital assume any liability. This information is given as of the date appearing on this newsletter, and neither the author nor Canaccord Capital assume any obligation to update the information or advise on further developments relating to the information provided herein. This newsletter is intended for distribution in those jurisdictions where both the author and Canaccord Capital are registered to do business in securities. Any distribution or dissemination of this newsletter in any other jurisdiction is strictly prohibited. The holdings of the author, Canaccord Capital, its affiliated companies and holdings of their respective directors, officers and employees and companies with which they are associated may, from time to time, include the securities mentioned in this newsletter.

OFFICES IN MAJOR CENTRES ACROSS CANADA. MEMBER OF ALL CANADIAN STOCK EXCHANGES AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA. MEMBER CANADIAN INVESTOR PROTECTION FUND (CIPF).