Volatility to reign over equities after dismal start in 2016, says DBS

Welcome to the year of the bear.

Steep stock market losses in the first trading week of 2016 does not bode well for equities this year, according to a report by DBS.

"Our core call for 2016 remains: equities will likely trade lower through the course of the year," DBS said.

DBS warned that continued worries over China's slowing economy and uncertainty over the pace of interest rate normalisation will keep stock volatility high this year.

"Singapore, Malaysia, Thailand and Indonesia had one of their worst years since the Asian Financial Crisis (AFC), Dot.com bubble and Global Financial Crisis (GFC). This was largely due to exports slowdown and weak commodity prices," said the report.

Despite continued fears over China's growth, DBS believes that the giant's slowdown is policy-engineered and hence should not be taken as a sign of crisis.

"At the heart of the market’s moves is concern that China – at the centre of a global growth decline – could go into crisis. A global growth decline is plausible. However, a crisis in China remains a low probability event. This is a policy-engineered slowdown to restructure the Chinese economy," said the report.

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