Caught between market fear and opportunity

Investors are in a skittish mood, bouncing between selling off risk at the first hint of trouble and snapping up bargains when things are calm.

Some investors are suggesting that the corrections of the past few weeks may be hitting bottom, but few, if any, foresee anything but volatility ahead.

With this in mind the meeting of G20 finance ministers in South Korea in the coming week is likely to be a key focus. It brings with it everything from macroeconomic appraisals to talk of currency imbalances and even geopolitical tension from North Korea. The main question for investors, meanwhile, is whether the roughly 17.5 per cent fall in MSCI's all-country world stock index between mid-April and last Tuesday was for the correction. The index has rebounded about six per cent since then.

Keith Springer, President of California-based wealth advisers Capital Financial Advisory Services, think it might be.

"The selling action [during the week] looks like a selling climax where people throw in the towel and run for the hills," he said. "People were panicking."

There are other tell-tale signs that the sell-off, which has infected other assets such as emerging market debt, growth-linked commodities and high-yielding currencies, may be limited.

Reuters asset allocation polls, for example, showed large, long-term investors stepping away from equities, but at less of a rate that they have been.

There is also no sign of the wholesale dash to cash by investors that was seen when the sub-prime crisis threatened to overturn the global banking system.

Data from iMoneyNet showed a net $7.3 billion (Dh26.81bn) moved into US money market funds in the week to May 25. But this followed a net $36.9bn outflow the week before that.