Indofood Agri 231208

Another counter that failed to break out of its double-bottom neckline. Indofood Agri traded more or less sideways after failing to break the 0.575 neckline (red ...) on 11 dec. Indofood Agri also finally broke the 0.505 support (blue ...) and uptrend support (low blue), and closed right on the 0.490 support (pink ...).

If Indofood Agri fails to hold onto its 0.490 support, we could see it weaken further to test the 0.470 support (green --). And if that support also breaks, we could see Indofood Agri retreating all the way to the 0.445 support (blue --).

Any rebound would be limited to the 0.525 resistance (red --) as we can see from the chart that the short-term (upp red) and long term (upp pink) downtrend resistances meet there.


For tomorrow :

Support @ 0.490 (upp pink, pink ...), 0.470 (green --), 0.460 (green ...), 0.450 (low red), 0.445 (blue --), 0.420 (pink --)

Resistance @ 0.505 (upp red, blue ...), 0.515 (low blue), 0.525 (red --), 0.535 (upp blue), 0.545

Cosco 231208

After hitting a high of 1.17 on 11 dec, Cosco has now retreated to the peak (pink --) of the double-bottom, which was where it broke out from on 10 dec. Along the way down, Cosco did not even come near to testing the downtrend resistance (upp red) even once.

This week could be crucial for Cosco as it would need to hold onto the 0.930 support (pink --) for any chance of a rebound. However, even if there is a rebound, Cosco would face lots of resistance from 0.980 to 1.00.

If the 0.930 breaks, which I think would be likely, we could see Cosco retreating to the 0.870 support (blue --). Further weakening could even see Cosco retreating all the way to the 0.800 level, which is where the 2 downtrend support (low red, low pink) meet.


For tomorrow :

Support @ 0.930 (pink --), 0.910, 0.870 (blue --), 0.860 (low pink), 0.845 (lightblue ...), 0.835 (low red), 0.815 (red --)

Resistance @ 0.950 (low blue), 0.990 (upp pink), 1.00 (upp blue, red ...), 1.02 (upp red)

China Hongx 231208

China Hongxing went downhill after failing to break the 0.230 neckline (red --) on 11 dec, even forming a Gravestone Doji on 15 dec, which usually meant a reversal in an uptrend.

After the Gravestone Doji, China Hongxing went on to break several supports, trading within the long term (red) and short term (pink) downtrend channels. China Hongxing also tested the 0.180 support (lightblue ...), which coincided with the downtrend support (low pink).

Moreover, today's breakdown was accompanied with a surge in volume compared to the past few days. Almost 42m was done at the 0.185 level, with 16m selldowns and 26m buy ups.

Since nov, China Hongxing has now tested the 0.180 support twice - 26 nov and 2 dec. We could see some action for China Hongxing this week as the long term downtrend resistance (upp red) meets the uptrend support (low blue) at the 0.185 level.

If the 0.180 support (lightblue ...) holds, we could see China Hongxing testing the 0.200 resistance (blue --). However, if the 0.180 breaks (for the third time), we could see China Hongxing re-testing the 0.160 level.


For tomorrow :

Support @ 0.188 (low blue), 0.185 (red ...), 0.180 (lightblue ...), 0.175 (low pink), 0.170, 0.165
Resistance @ 0.190 (upp red, lightblue --), 0.195, 0.200 (blue --), 0.202 (upp pink), 0.205 (upp blue, green --)

Cosco 111208

After breaking the 1.10 resistance (lightblue --) yesterday, Cosco came very to testing the 1.18 resistance (green --) today. Volume done today was almost the same as yesterday, with about 10m done at 1.09 and 8.7m done at 1.10.

As you can see from the chart, the 2 downtrend resistances meet the uptrend resistance (upp blue) at around 1.13 - 1.15. We may see some action tomorrow as Cosco could attempt to break the 1.15 level again convincingly, and test the 1.18 resistance.

If that fais, we could see Cosco retreating to the uptrend support (low blue).


For tomorrow :

Support @ 1.10 (lightblue --), 1.02 (low blue), 1.00 (red ...), 0.970 (low red), 0.930 (pink --)
Resistance @ 1.12 (upp blue), 1.14 (upp pink), 1.15 (upp red), 1.18 (green --)

Semb Marine Research Report

by CIMB-GK (10 Dec)

SEMBCORP Marine has secured a $200 million contract to convert a VLCC to a FPSO for Modec, a Japanese EPCI (engineering, procurement, construction and installation) player. Delivery is planned for Q1 2011.

We believe that the outlook for the production segment is more positive than rig-building. Oil exploration and discoveries have accelerated in the past few years, driven by an unprecedented spike in oil prices. Therefore, we believe that the demand for production-related equipment remains to support the recent oil discoveries.

Upstream reported that SMOE, SembMarine's subsidiary, together with an Italian contractor Saipem, is bidding for a US$600 million EPCI processing platform contract from Premier Oil's Gajah Baru gas project in West Natuna Sea, Indonesia. The contract is expected to be finalised by end-2008.

We believe that the production segment in the offshore & marine value chain would be less susceptible to credit volatility as FPSOs and offshore platforms are typically owned and operated by oil companies with stronger financial track records.

No change to our forecasts as this win is within our order-book assumptions. Total order book is now about $10 billion. SembMarine remains our top pick in the offshore & marine sector for its strong balance sheet (net cash) and attractive dividend yields. The stock is cheap at its historical low of 6x CY10 PE. Stronger-than-expected order wins could provide stock upside.

-Research Report by CIMB-GK (10 Dec)

Noble Group 091208

Noble Group broke the downtrend resistance (upp pink) and tested the 1.01 resistance (blue --) for the 2nd time today. Volume done today was more or less about the same as the last few weeks. Most trades were done at 1.00 with about 70% buying up.

If Noble Group manages to stay above the 0.965 support (green --), we could see it attempt to break the 1.01 resistance (blue --) again this week.


For tomorrow :

Support @ 0.995 (blue ...), 0.965 (green --), 0.955, 0.935 (low red, upp pink, red --), 0.910 (pink ...)
Resistance @ 1.01 (blue --), 1.025 (upp blue), 1.04 (green ...), 1.045 (mid red), 1.08 (pink --)

Indofood Agri 091208

Indofood Agri did not have the chance to test the 0.470 resistance (green --) today. That's because it gapped up on opening and never looked back, testing the 0.505 resistance (blue ...) before closing above the 0.490 support (pink ...) and uptrend support (mid blue).

Volume done today was also quite high, almost the same level as 1 dec. Most of it was done at 0.495, with buying up and selling down volumes almost equal.

As there still quite a few more necklines to break, it is still early to say if Indofood Agri has completed the double bottom formation. Two immediate necklines lie in wait at 0.525 (red --) and 0.540 (pink --).


For tomorrow :

Support @ 0.490 (pink ...), 0.485 (upp pink, mid blue), 0.470 (green --), 0.460 (low blue, green ...), 0.445 (blue --), 0.430 (red ...)

Resistance @ 0.495 (upp red), 0.505 (blue ...), 0.525 (upp blue, red --), 0.540 (pink --)

Cosco 091208

Cosco gapped up on opening and broke the long term downtrend resistance (upp pink) and the 0.930 neckline (pink --), which could be the first step to finally completing the double bottom formation.

However, today's formation could also be the 1st part of the Abandoned Baby or Evening Doji Star formations, which are bearish reversal patterns. Therefore, what happens tomorrow will be critical.

Some profit taking is inevitable as today is the 5th day Cosco is up. As long as Cosco stays above the 0.900 level, we could see the formation of the Mat Hold or Rising Three Methods, which are bullish continuation patterns.


For tomorrow :

Support @ 0.930 (pink --), 0.920 (upp blue, mid red), 0.900, 0.870 (blue --), 0.865 (low red), 0.860 (upp pink), 0.845 (lightblue ...)

Resistance @ 0.955 (upp red), 1.00 (red ...)

China Hongx 091208

We indeed saw some action for China Hongxing as it broke the long term downtrend resistance (upp red) with the highest volume since 18 jun (97m). Not only did China Hongxing broke the 0.215 resistance (blue ...), it also tested the 0.225 resistance (pink --).

The bulk of the volume done was at 0.215, with about 15m selling down and 17.9m buying up. The next highest volume done was at 0.205, with about 18.4m selling down and 5.4m buying up.

Although China Hongxing broke the 2 downtrend resistances (upp red, upp pink), it reversed its earlier gains to close right on its opening price, thus forming a Gravestone Doji. As China Hongxing was on the uptrend for the last few days, the formation of a Gravestone Doji may not be a good sign for those longists.

If China Hongxing breaks the 0.205 support (mid blue, green --), we could see it re-testing the 0.190 support (lightblue --). If this support holds, we could see China Hongxing trading between the upp uptrend channel.


For tomorrow :

Support @ 0.205 (mid blue, green --), 0.200 (blue --), 0.195, 0.190 (upp pink, lightblue --), 0.185 (upp red, red ...)

Resistance @ 0.215 (blue ...), 0.225 (pink --), 0.227 (upp blue), 0.230 (red --), 0.245 (pink ...)

Straits Asia 051208

Straits Asia broke the long term downtrend resistance (upp red) last fri. It also tested the short-term downtrend resistance (upp pink), before closing the week right on the 0.840 neckline (pink ...). Although it was a breakout, the volume done on fri (38.6m) was just slightly more than half of thurs (50.3m), and fri was the third day Straits Asia was up.

You can see from the chart that the long term downtrend resistance (upp red) meets the uptrend support (mid blue) at the 0.795 support (green --). There's also another volume resistance at the 0.850 level (pink --) which Straits Asia tested last fri but couldn't break. It is also from this level (0.850) that Straits Asia tumbled on 12 nov.

If Straits Asia fail to break the 0.850 resistance this week, we could see it retreating to the 0.795 support.

However, if Straits Asia breaks the 0.850 resistance, we might see it flying at least to the 0.900 level, or even test the 0.920 neckline (green ...)


For tuesday :

Support @ 0.835 (pink ...), 0.795 (upp red, mid blue, green --), 0.740 (blue --), 0.725 (low blue), 0.710 (red --)
Resistance @ 0.850 (mid pink, pink --), 0.865 (upp blue), 0.920 (green ...), 0.950 (upp pink), 0.980 (red ...)

Indofood Agri 051208

Although Indofood Agri managed to close above yesterday's closing price of 0.445, it also tested the uptrend support (low blue), and nearly tested the 0.430 support (red...). Volume down was less than half of yesterday's too.

As you can see from the chart, the downtrend resistance (upp red) meets the uptrend support (low blue) at 0.455, which incidentally was where Indofood Agri closed on 17 nov before tumbling to a low of 0.385 on 20 and 21 nov.

If Indofood Agri doesn't break the 0.455 level soon, we could see history repeating itself, with Indofood Agri first testing the 0.430 support (red ...).

Any break above the 0.455 level could see Indofood Agri testing the 0.470 resistance (green --) for the fourth time.

Watch the volume too.


For tuesday :

Support @ 0.455 (upp red, low blue), 0.445 (blue --), 0.430 (pink, red ...), 0.420 (pink --), 0.413 (low red), 0.410 (red --)
Resistance @ 0.455 (upp red, low blue), 0460 (green ...), 0.470 (green --), 0.490 (upp blue, pink ...)

Cosco 051208

I've updated the long term downtrend channel (pink). You can see from the chart that 2 trendlines (upp pink, upp blue) meet at the 0.870 neckline (blue --), and Cosco closed right on this neckline today. Volume done was also about a third of yesterday's. Profit taking?

The first neckline for Cosco at 0.930 (pink --) has yet to be tested so a double bottome formation cannot be confirmed yet. A successful break of this neckline could see Cosco heading for the 1.20 -1.30 level.

If Cosco can stay above the 0.870 support on tuesday, there's a good chance we might see it test the 0.930 resistance. However, if that support breaks, we could see Cosco pulling back to the next support at 0.845 (lightblue ...).


For tuesday :

Support @ 0.870 (upp pink, upp blue, blue --), 0.845 (lightblue ...), 0.815 (red --), 0.800 (mid blue), 0.795 (green ...)
Resistance @ 0.870 (upp pink, upp blue, blue --), 0.910, 0.930 (pink --), 1.00 (red ...)

China Hongx 051208

China Hongxing closed the week right on the long term downtrend resistance (upp red), and volume was about half of the last 2 days. Also, the 0.190 support (lightblue --) seems to be holding up quite well.

If China Hongxing can hold onto its 0.190 support, there's a good chance we might see some action next week as the long term downtrend (upp red) meets the 0.190 support (lightblue --).

Any break in the 0.195 resistance might see China Hongxing testing the 0.215 resistance (blue ...).

Any break in the 0.190 support might see China Hongxing re-visiting the 0.180 support (lightblue ...).


For tuesday :

Support @ 0.190 (upp red, lightblue --), 0.185 (red ...), 0.180 (lightblue --), 0.178 (low blue), 0.175 (low pink)
Resistance @ 0.195 (upp pink), 0.200 (blue --), 0.205 (upp blue), 0.215 (blue ...)

Until Wall St capitulates, best to stay nimble

Weekly Report by R SIVANITHY (7 Dec)

SINGAPORE - Last week's column advised investors to be careful buying into what was most probably yet another bear trap. As it turned out, the Straits Times Index, which clearly enjoys support from the thinly-traded Jardine group, gave up the 70 points it had gained the previous week through month-end window-dressing when it lost 73 last week.

Jardine's inclusion aside, the advice this week cannot be much different, notwithstanding Friday's rise on Wall Street which was founded on the perverse logic that because the November jobs report was so awful, the automakers will surely have to be bailed out by a government who cannot risk making things worse by not doing anything.

In other words, as long as the economic data is terrible, this increases the chances of a government bailout and so the market must go up. This means that the worse the economic figures the better the market will react - a warped way of thinking indicative of a desperately sinking Wall Street seeking any straw to clutch to stay afloat but knowing at the back of its mind that it is only delaying the inevitable.

There is a growing realisation among investors that the downturn may be worse and more prolonged than previously thought and that markets have not yet displayed the necessary capitulation that could signal a trough.

This is a point made several times before in this column but bears repeating - the US market is still too overly optimistic and overvalued relative to its economic and earnings prospects, even with massive government help.

Investors - those with pockets deep enough to do any meaningful buying during these difficult times - would do well to take note of this.

In its Asia Insights titled 'Cautious but looking for ideas', HSBC said it spent two weeks recently visiting more than 60 investment institutions in eight cities, a trip that gave it a reasonably good feel for the range of opinions among fund managers, most of whom were bearish.

'But, while few investors are convinced that Asian markets have definitely bottomed, we found less ultra-bearishness than we expected. Most investors feel that the monetary and fiscal stimulus dealt out by national authorities everywhere will cause growth to pick up in H2 2009, and that the bail-out of Citigroup means that all the large troubled US banks have now been rescued.'

'On China, there is a particularly widespread consensus that growth will be strong again by the second half of next year. Consequently, we found many investors keen to discuss where to invest next year: deep value stocks versus blue-chips, China or Korea, deep cyclicals or financials, how about Thailand, is it too early for small caps?

We have some sympathy with these views but, since sentiment has not yet reached capitulation (or indifference) point, we suspect that the worst may not be over.'

To this we'd like to add that there is growing irrational optimism that China will come good after all its problems in 2008 and that this turnaround will fuel Asian growth and cause Asian economies to decouple from the US.

Like the perverse Wall St logic earlier, this is a highly dubious line of reasoning from a battered investment community desperately seeking to redeem itself after a year of failure by rehashing an old, disproven theme that should by now have outlived its usefulness.

Not all is gloom however and there is some hope later next year - in its Dec 4 Asian Market Strategy for example, Credit Suisse said it believes Asian markets have already priced in a long and deep recession and that its Six Factor Valuation Indicator shows Asian markets to be 50 per cent undervalued.

However, it called an 'underweight' on Singapore saying 'driven by expected declines in consumer and corporate spending, domestic demand which has held up well is expected to weaken going into 2009. Credit Suisse said banks were its biggest underweight while it is overweight telcos and transport.

In the meantime, investors with poor timing skills should dismiss urgings to buy now because markets are 'oversold' since the word had no precise meaning in the investment vocabulary and is not a viable basis on which to make an investment. Best to wait until Wall St capitulates before doing anything - and that could be weeks or months away yet.

-Weekly Report by R SIVANITHY (7 Dec)

Next week | Dec 8 -12, 2008

US DATA

Dec 9
Oct pending home sales

Dec 10
Oct wholesale inventories
Crude inventories
Nov treasury budget

Dec 11
Oct trade balance
Nov export/import prices ex-ag
Initial job claims

Dec 12
Nov core PPI
Nov retail sales
Oct business inventories

SINGAPORE DATA

Dec 9
Nov international reserves

EVENTS

Dec 8
Brussels - ECB president
Jean-Claude Trichet testifies before the European Parliament's Committee on Economic and Monetary Affairs (1400 GMT)

Shocking job numbers rattle Wall St

by ANDREW MARKS (6 Dec)

Sympathetic noises from Congress on rescue for Detroit Three carmakers temper fears

FOR the whole of this week, Wall Street had been trying hard to hold on to the little optimism eked out from the most recent wave of government capital injections.

That effort seemingly came to an abrupt end yesterday.

In the face of a shockingly bad November jobs report, the mood of stockmarket investors nosedived as news that the US economy shed 533,000 jobs, the worst single month since 1974, filtered through.

On average, forecasts had expected a loss of about 400,000 jobs. The unemployment rate rose to 6.7 per cent from 6.5 per cent in October. The government added that it was revising its jobs data for September and October, loading on 199,000 more layoffs than previously thought. That brings the total reduction in US non-farm payrolls for the last three months to 1.256 million, with almost two million shed in the year so far.

Investors reacted to the data in predictable fashion. Stocks slid shortly after the opening bell, with the Dow falling 80 points, or one per cent, in the first minutes of trading. That widened to a loss of 220 points by 11.30 in the morning as the blue chip index hit 8,155.

But there is a glimmer of hope. Wall Street seemed encouraged by remarks at the opening to yesterday's Congressional hearings for a bailout for the Big Three carmakers.

Barney Frank, chairman of the House financial services committee, said: 'In the midst of the worst economic situation since the Great Depression, letting the Big Three fail is simply unacceptable. Any effort to resist a rescue of the auto industry in the face of such a massive jobs crisis must fall by the wayside,' he said.

On Thursday afternoon, stocks took a hit in the final hour of trading, as investors pulled money off the table before yesterday's jobs report, not wanting to risk losing all their profits of recent days.

Economist Joel Naroff, president of Naroff Economic Advisors, had anticipated a record layoff number following the Wednesday release of the Institute for Supply Management's Non-Manufacturing index November numbers, which recorded it's largest monthly decline since the survey was begun in 1997.

'This is obviously a bad number, showing how hard a hit the economy is taking. But you have to remember this is a lagging indicator and it appears that businesses are adjusting extremely rapidly to the real time information about the problems.

That may be compressing the time it takes to downsize when a recession hits. As a consequence, the data is deteriorating more sharply than we are used to seeing,' he said.

As shocking as the number is, Mr Naroff thinks that the economy could also see an end to the huge losses in jobs and demand sooner than would typically be the case in a severe recession.

'It's like being hit by a hurricane. We have to ride out the intense storm, but the silver lining is we might get good weather sooner than history would indicate,' he said.

It will probably be weeks, if not months before the stock market will agree with Mr Naroff's positive analysis of the collapse in all the data.

Said Joe Battipaglia, investment strategist at Ryan, Beck, 'These awful numbers we're getting could be taken as indicating that the bottom is coming, but at this point, they could also be taken as a sign that we're in even worse shape than we believed.'

'That means stock market sentiment will continue to be highly volatile and subject to change with every new piece of significant data,' he said.

The severity of the jobs report has also raised expectations on Wall Street that Congress and the Treasury will keep GM and Chrysler in business while the debate over how to restructure the car industry gets aired.

'Everybody knows now that the automakers will get their loan - there's no choice, and this report also raises the certainty we'll get a huge stimulus programme, probably north of US$500 billion, once Mr Obama is inaugurated in January,' said Jim Awad, managing director of Zephyr Capital Management.

-Research Report by ANDREW MARKS (6 Dec)

Week when selling holds sway

by R SIVANITHY (6 Dec)

SHOCKING news that the US economy has been in a recession - defined as a general contraction in economic activity rather than two consecutive quarters of declines - for a year now, the failure of US carmakers to convince the government to bail them out and a sharp drop in trading volume were three of the main features of the past week.

The fourth was the 'buy the index in the morning, and sell in the afternoon' trading pattern that was evident in the final three days of the week, each time because of expectations that Wall Street would tank later that evening.

As it turned out, though, the selling outweighed the buying, insofar as the STI was concerned, the benchmark ending the week 15.49 points higher yesterday but losing 73 points or 4.2 per cent over the five days to 1,659.17.

This wiped out the 70 points gained over the previous week, which was mostly likely through month-end window-dressing.

Blue chips in play throughout this week included SingTel following an Investor Day, the banks and the thinly traded Jardine group. In yesterday's session, for example, Jardine Matheson's US$0.44 rise to US$16.24 came with just 258,000 shares traded but added 2.2 points to the STI.

Property stocks had a poor five days, the FT Real Estate Index losing almost 6 per cent. Financials were not far behind with the FT Financials Index dropping about 5 per cent.

Other than commodities, the main sector in play was a heavily battered China segment led by an oddly resurgent Cosco Corp that gained 16 cents or 23 per cent over the week to 87 cents despite a slew of 'sell' calls following a large order cancellation.

The bulk of daily volume was generated by brokers and house traders, with general public participation virtually zero. Yesterday's turnover of 867 million units worth $747 million was roughly in line with the week's average and low enough to suggest that any investor with money to invest has probably already gone on holiday.

More sobering outlook reports were issued over the week, among them Goldman Sachs' (GS) 'Many Rivers to Cross' and UBS Investment Research's (UBSIR) 'Navigating a Recession'.

The former said risks to growth are to the downside, notwithstanding countervailing policy actions, and this will increase risks to earnings. 'We expect a global recession in 2009 . . . we feel there are sufficient reasons to examine the possibility that this downturn will be more prolonged than currently expected.

These include (a) the negative momentum of consensus forecasts, (b) the size of the debt burden in the US and (c) the deleveraging experiences of Japan and Sweden in the 1990s,' said GS.

UBSIR said it thinks a rally of 15-20 per cent in Q1 '09 is possible purely because markets are oversold but its central thesis is for a 'grim economic outlook and high risk aversion'.

It said the market has not priced in the success of the two integrated resorts but, on the downside, investors should watch the job market - where UBSIR expects 30,000 jobs to be lost during the year.

On a more positive note, the broker said it has a fair value of 2,100 for the STI at year-end.

-Research Report by R SIVANITHY (6 Dec)

Olam 041208

After trading sideways for more than the last 2 weeks, we finally saw some action today. Olam broke the long term downtrend resistance (now turned support - low red). Volume done today was also the most since 30 may 2008 (35.1m).

After breaking the 0.960 neckline (green ...), Olam went on to test the 1.00 resistance (blue --), before closing just above the 0.960 neckline. If Olam manages to continue to trade above the 0.960 neckline, we could see it test the 1.00 resistance very soon.

However, if Olam breaks the 0.960 support, we could see it revisiting the 0.930 support (green --).


For tomorrow :

Support @ 0.970 (upp grey), 0.960 (green ...), 0.930 (green --), 0.920 (low red), 0.900 (pink --), 0.890 (mid grey)
Resistance @ 1.00 (blue --), 1.05 (mid red), 1.06 (blue ...), 1.09 (red --)

Noble Group 041208

Although Noble Group is still trading within the uptrend channel (blue), it closed the day at its opening price, almost forming a Gravestone Doji. Noble Group retreated quite abit after failing to break the 1.01 resistance (blue --) last fri (28 nov).

If Noble Group manages to continue to trade within the uptrend channel (blue), we could be looking at Noble Group trading between the uptrend support (mid blue) and downtrend resistance (upp pink) as it tries to form a base.


For tomorrow :

Support @ 0.935 (red --), 0.900 (mid blue), 0.885 (red ...), 0.875 (low pink), 0.870 (low red), 0.860 (red ...)
Resistance @ 0.965 (upp pink, green --), 0.9825 (upp red), 1.01 (upp blue, blue --), 1.05 (green ...)

Indofood Agri 041208

Indofood Agri failed to break the 0.470 resistance (green --) after testing for the third time today. Indofood Agri even closed at its opening price, forming a Gravestone Doji.

Since Indofood Agri has been on the uptrend since 26 nov, we could see some pulling back if it fails to hold onto its 0.445 support (blue --).


For tomorrow :

Support @ 0.445 (low blue, blue --), 0.430 (low red, red ...), 0.420 (pink --), 0.410 (red --)
Resistance @ 0.460 (upp pink, green ...), 0.465 (upp red), 0.470 (green --), 0.480 (upp blue)

Cosco 041208

After breaking the long term downtrend resistance (upp pink) yesterday, Cosco continued its upward surge with almost twice of yesterday's volume done. However, Cosco did test the 0.795 support (green ...), before reversing and charged towards the 0.870 resistance (blue --) and closing just above it.

Having said that, it is still too early to say if Cosco has indeed completed the double bottom formation, as it has yet to break the 0.930 neckline (pink --). We could see some profit taking along the way, more so if Cosco manages to test the 0.930 neckline.

It remains to be seen if Cosco can hold onto its 0.870 support (blue --). Any weakness could see Cosco pulling back to the 0.815 support (red --).


For tomorrow :

Support @ 0.870 (blue --), 0.845 (mid blue, lightblue ...), 0.815 (red --), 0.795 (green ...), 0.755 (upp pink, blue ...)
Resistance @ 0.923 (upp blue), 0.930 (pink --), 1.00 (red ...)

China Hongx 041208

I've updated the long term downtrend channel (red), as well as added a short-term downtrend channel (pink). As you can see from the chart, both of these resistances coincide with the 0.200 resistance neckline (blue --).

Moreover, the long term downtrend resistance (upp red) is also pushing China Hongxing towards the 0.190 support (lightblue --).

We could see some action tomorrow for China Hongxing. If it still fails to break the 0.200 neckline, we could see it revisiting the 0.180 support (lightblue ...).


For tomorrow :

Support @ 0.190 (lightblue --), 0.180 (lightblue ...), 0.177 (low blue, low pink), 0.170 (green --)
Resistance @ 0.195 (upp red), 0.198 (upp pink), 0.200 (blue --), 0.205 (upp blue), 0.215 (blue ...)

STI pulls back as Dow futures fall

by R SIVANITHY (4 Dec)

Straits Times Index sheds early gains in anticipation of Wall Street drop; index propped up by SingTel

So judging by the Straits Times Index's late dive, US stocks were expected to turn in a weak session yesterday. After rising as much as 30 points in the morning to 1,670, the Straits Times Index (STI) ended just 1.39 points up at 1,640.57.

A 150-point loss in the December futures contract on the Dow Jones Industrial Average and Europe opening an average of 2 per cent weaker accounted for the late nervousness, though the broad market clearly did not have time to react to the sell-off in the index - excluding index stocks and warrants, there were still 185 rises versus 120 falls in the rest of the market.

Hong Kong's Hang Seng Index continued to set the pace throughout the day, penny commodity and China stocks continued to soak up what little liquidity there was and as far as the Straits Times Index was concerned, it was almost entirely propped up by SingTel, possibly because it appeared as top pick in Merrill Lynch's 'most preferred' list. SingTel's eight-cent rise to $2.50 added 8.3 points to the STI.

None of this should come as any surprise. For one, anecdotal evidence is that many fund managers have closed their books early for the year and gone on holiday, a major factor behind the poor volume of the past few weeks.

In yesterday's session, a weak one billion units, excluding foreign currency issues, worth $744 million were traded.

Economic news coming out of the US has mainly been negative, with the worst manufacturing number since 1982 released on Monday. The latest jobs report is due on Friday. Analysts too are now increasingly bracing themselves for a weak 2009.

In its Dec 2 Emerging Markets Daily, for instance, Citigroup Global Markets said of Singapore that near-term growth prospects are grim with the economy unlikely to escape a contraction next year.

'The current recession is likely to continue for at least the next two to three quarters with GDP expected to contract in y-o-y terms, at least through 1H09,' said Citi. It said its GDP forecast is well below consensus or government forecasts and added that any uncertainty with forecasts relates to the magnitude rather than the likelihood of a contraction.

UBS Investment Research (UBSIR) issued its 2009 Outlook report yesterday titled Navigating a recession. It said there could be a rally of 15-20 per cent in the first quarter because markets are deeply oversold but its central thesis is for a grim economic outlook and high risk aversion.

UBSIR is expecting 30,000 job losses in 2009 - the worst on record for a single year but less severe than the cumulative 42,000 lost during the Asian financial crisis and the 79,500 lost during the two years when the tech bubble burst and Sars struck.

'We forecast a fair value of 2,100 for the STI at end-2009, assuming 12x trailing PE and a 33 per cent decline in earnings. We see a firmer uptrend mostly at the tail end of 2009 when the worst of the economic conditions are likely to have passed,' said UBSIR.

In a property wrap titled Buy another day, JPMorgan said with financing as uncertain as it is, the fundamental value of properties cannot be reliably determined. It noted that in previous cycles it took 11-13 quarters between peak and trough prices and that if the most recent peak was mid-2007, the next trough should be mid-2010.

-Research Report by R SIVANITHY (4 Dec)

Commodities Sector Research Report

by OCBC INVESTMENT RESEARCH (3 Dec)

COMMODITIES have gone through a roller-coaster ride in 2008 and are likely to fall victim to further volatility in 2009 along with the broad market. 2009 presents a challenging macro outlook. Moving into next year, we believe that several macro factors could continue to weigh on the sector's outlook.

These include the shaky global macroeconomic outlook, softening demand from manufacturers and consumers, a prolonged credit drought and falling commodities prices.

While the near-term outlook is likely to remain muted, coordinated government policies could help to stabilise the overall climate in the medium term. For instance, China has recently announced a four trillion yuan (S$888 billion) stimulus package and an interest rate cut to boost the cooling economy. Large-scale spending such as these will help to bolster the demand for commodities such as steel and energy, albeit in the further future.

Commodities have been proven to outperform the stock market in times of crisis. Nevertheless, as demand for commodities is a function of the global economy, we expect the sentiment for these stocks to recover only when macroeconomic pessimism fades. As such, we are NEUTRAL on the sector.

At current valuations, the risk-reward profile of some stocks has grown attractive for long-term investors who are prepared to ride out the volatility.

-Research Report by OCBC INVESTMENT RESEARCH (3 Dec)

China Milk Research Report

by DMG & PARTNERS SECURITIES (3 Dec)

IN November, the Chinese government overhauled the entire dairy industry to improve safety at every step of the value chain. From cow breeding to the end product that customers consume.

We believe that China Milk is going to benefit from this because they have extremely high quality standards and supervision at every stage of the value chain.

China Milk feeds its herd the best quality feed, which it grows itself. The fertiliser used to grow the animal feed is also from its own herd. This insures that there are no dangerous chemicals being added to the crops. In our view, we believe that the Chinese government should base quality standards using China Milk as an example.

The exposure of many problems existing in quality control and supervision of the industry has dampened China's global reputation. However, we believe that the rebuilding process of its dairy industry will only make China's dairy sector more attractive in the long term.

-Research Report by DMG & PARTNERS SECURITIES (3 Dec)

No surprise again as STI reacts to US dive

by R SIVANITHY (3 Dec)

ONCE again, there was no surprise in trading yesterday as Wall Street's already-anticipated - at least in this column - Monday crash reverberated around this part of the world.

With Japan caving in by 6 per cent, Hong Kong's Hang Seng Index losing 5 per cent, Australia 4 per cent and Europe opening an average 1.5 per cent weaker, the Straits Times Index stood little chance, though there was some consolation in the fact that it fell by only 51.05 points or 3 per cent to 1,639.18 and that trading was thin and listless.

Wall Street's loss of almost 9 per cent on Monday should not have surprised anyone, given that its major indices had been clearly window-dressed last week for the November month-end.

Still, news reports attributed the fall to official confirmation from the National Bureau of Economic Research that the US has been in recession for 12 months now, as well as a poor reading for the November Institute for Supply Management's index of manufacturing conditions. The latter figure came in at 36.2, below the consensus of 37, and was the weakest since 1982.

Independent research outfit Ideaglobal said in its Financial Markets Today that 'although the manufacturing landscape has been weak for some time now, this could mark the next leg down for prospects for the sector for months to come as conditions are unlikely to improve any time soon'.

Ideaglobal added the data confirms that domestic US weakness is now complementing deteriorating global conditions and that this should enhance the case for a 50-basis-point interest rate cut at the Dec 16 Federal Open Market Committee meeting.

Brokers attributed the subdued conditions here to the absence of many players either due to the holiday season and/or their losses over the past year, which by now would have reached extreme proportions.

Turnover, excluding foreign currency issues, was a poor 750 million units worth $770 million, with volume concentrated on commodity stocks like Golden Agri, Indofood Agri and Noble Group, and battered China stocks like Yangzijiang, China Hongxing and Cosco Corp.

Virtually the entire list of top 20 rises were structured put warrants on various indices, mainly the Hang Seng. DBS stood out among the banks as the only gainer, while after outperforming on the way up last week, UOB looks to be now doing the same on the way down - it dropped 48 cents on Monday and 70 cents yesterday to end at $12.

Credit Suisse (CS) maintained its 'underweight' on the property sector. In its Asian Daily yesterday, CS said it expects news flows from the sector to remain negative as default/credit risks rise in a recessionary environment. Its bear-case RNAV for CapitaLand is $1.70 and for City Developments is $4.51.

Merrill Lynch, in the meantime, on Monday maintained a 'neutral' view on City Dev with a $5.86 target price, following news that the latter's hotel subsidiary has not been able to sell the Millennium Seoul Hilton in Korea.

CapitaLand yesterday fell 10 cents to $2.49 with 14 million traded, while City Dev lost 13 cents at $5.25 with 2.5 million done.

-Research Report by R SIVANITHY (3 Dec)

China Hongx 031208

China Hongxing broke the long term downtrend resistance (upp red) today. Although today's volume was more than doubled yesterday's, it is only about half of the volume during China Hongxing's surge during end oct to early nov.

China Hongxing tested the 0.200 neckline (blue --) before ending the day just below it. Only 1 trade of 30 lots was done at 0.200. A total of 12,756 lots (11,599 lots buying up) was done at 0.195, and 21,166 lots done at 0.190 (50% buying up and selling down).

It remains to be seen if China Hongxing can maintain its uptrend momentum and break the 0.200 neckline (blue --). Or we might still continue to see it trading sideways between the 0.180 support and 0.190 neckline, which could still be profitable.


For tomorrow :

Support @ 0.190 (lightblue --), 0.180 (lightblue ...), 0.177 (low blue, upp red), 0.170 (green --)
Resistance @ 0.200 (blue --), 0.205 (upp blue), 0.215 (blue ...)

Cosco says client cancels order for 2 vessels

SINGAPORE - Cosco Corp said on Wednesday that a customer has scrapped orders for two of five bulk carriers because of unfavourable market conditions.

The Chinese ship building and repair firm will also postpone delivery of the remaining three vessels to June 2010 from December 2009, it said in a filing to the Singapore Exchange. The order was made in July 2007.

Cosco did not disclose the contract value, but a July 2007 statement said the firm had clinched orders for eight 57,000 deadweight tonne bulk carriers worth a total of US$313 million.

As part compensation, the buyer has to pay 80 per cent of the contract price for the remaining three vessels this month.

The buyer will also compensate Cosco Dalian for all expenses incurred for the two cancelled orders, for which construction has not started. -- REUTERS

Semb Marine Research Report

by BNP Paribas (2 Dec)

LOWER but not low oil prices: We believe it is reasonable to question the general outlook for the oil industry following the recent news about potential order cancellations at Keppel Corp.

For Sembcorp Marine (SembMarine), we are concerned if the offshore orders would decline drastically and coupled with order cancellations would decimate the order books.

Seadrill, a client of SembMarine, is facing difficulties in getting financing for some of its offshore orders with SembMarine. This is resulting in a potential order cancellation by Seadrill.

Analysis of Seadrill's financials gives us a better picture of the underlying situation. Seadrill's profit & loss and cashflow positions are good, indicating strong underlying business fundamentals. For Q3 2008, net profit increased 211 per cent y-o-y to US$69 million. Operating cashflow stood at US$730 million (up 12 per cent y-o-y).

It was poor corporate finance decisions that led to difficulties. Net gearing in Q3 2008 was 163 per cent, up from 122 per cent q-o-q. There are also other factors working against it - total return swaps, aggressive off-balance sheet financing and large equity investment stakes.

Oil prices have now declined for the fifth month since its high of US$147 per barrel in July 2008 and yet rig utilisation and day rates are still strong. Our positive argument for SembMarine is dependent on the recovery of overall market sentiment and not earnings.

Also, lower oil prices at US$50-60 per barrel are not only sustainable for oil producers, they ensure that costs for most economic activities will be lower in 2009. We believe cost deflation will be the first step in market sentiment recovery.

Lower oil prices will not only keep demand alive but also keep alternative energy out, and make it easier for producers to undertake long-term exploration decisions. This in turn will ensure SembMarine stays sustainably busy.

Valuation presents opportunity; SembMarine continues to trade well below the historical period of 1997-2003. Our TP remains at 12 times 2009 PE. The dividend yield is attractive at levels above 10 per cent.

-Research Report by BNP Paribas (2 Dec)

No surprise as STI falls in thin volume

by R SIVANITHY (2 Dec)

Index loses 2.4 per cent after last week's late, narrowly focused window-dressing push

PERHAPS not surprisingly, the Straits Times Index (STI) yesterday failed to follow through from last week's late window-dressing push, instead dropping 42.34 points or 2.4 per cent to 1,690.23 in extremely thin trading totalling 945 million units worth $745 million, excluding foreign currency issues.

Commodity stocks soaked up the bulk of what little volume there was, while among blue chips it was banks and property stocks that came under pressure.

The STI last week gained 70 points, in what was most probably an attempt to window-dress the month's performance using the mid-week announcement of a new US$800 billion lifeline by the US Federal Reserve for distressed US consumer debt markets as a launchpad.

However, the push was narrowly focused, centred mainly on index stocks and came with low volume - all of which suggested that it would not last.

This point was made by DMG & Partners in a technical view yesterday, where it said that although the index rose last week, any upside this week is expected to be short-lived.

'The mini-rally currently in play has not been accompanied by a significant increase in trading volume, an indication that buying momentum is not strong,' said the broker.

DMG noted that selling pressure would also probably be similarly contained because of low volume and set resistance at 1,760-1,770 and support at 1,570-1,580.

All three banks closed weaker, led by last week's top performer UOB which dropped 48 cents or 3.6 per cent to $12.70 with three million shares traded.

In a Nov 28 report on the sector, Macquarie Research said these are its operational expectations for the sector going forward: margins are expected to contract mildly, loan growth momentum to slow, non-interest income to soften on weak capital market conditions, and asset quality to progressively deteriorate.

Notwithstanding these, Macquarie recommended an 'overweight' on all three, with DBS and OCBC the top picks.

In the property sector, City Developments' (City Dev) 40-cent or 7 per cent plunge to $5.38 stood out after news that its hotel subsidiary M&C has been unable to finalise the sale of Millennium Seoul Hilton. In a 'hold' on City Dev, Deutsche Bank yesterday said this is negative for sentiment but there would be no impact on earnings.

In its 2009 Asia Pacific Portfolio Strategy dated Nov 29 and titled '2009 Outlook: Many rivers to cross', Goldman Sachs said investors should brace themselves for more risk than return.

'The investment outlook for Asian equities is probably one of low returns overall but with wide ranges ... the bottom line is that we think risks to growth remain on the downside notwithstanding countervailing policy actions. In turn, this is likely to increase the risks to corporate earnings and may keep valuations low.'

It added 'there are sufficient reasons to examine the possibility that the global downturn will be more prolonged than currently expected. These include a) negative momentum of consensus forecasts, b) the size of the debt burden in the US and c) the de-leveraging experiences of Japan and Sweden in the 1990s'.

Goldman also said it expects 15-35 per cent earnings declines in Asia for 2009 versus consensus of 5 per cent growth and that existing forecasts are unduly optimistic. China is its only 'overweight'; Korea, Taiwan and Australia were downgraded to 'underweight'; while Hong Kong and Singapore were classed as 'market weight'.

-Research Report by R SIVANITHY (2 Dec)

Be careful of buying into yet another bear rally

by R SIVANITHY (30 Nov)

SINGAPORE - Once the month-end window-dressing of the major indices seen last week is over with (probably early this week), it's very likely that Wall Street and markets in this part of the world will revert back to reacting to the dismal economic and earnings news that's being issued, news that's not expected to be good.

On Monday for example, the US market will have to ponder the release of the November Institute of Supply Management (ISM) manufacturing report. Independent research firm Ideaglobal over the weekend had this to say about the report: 'We expect the headline measure will continue pushing lower in Nov to 38, declining from 38.9 seen in Oct.'

'The manufacturing sector has seen consistently weak results thus far in 2008...thus far in Oct, the headline measures for both New York and Philadelphia painted a very grim picture for manufacturing in the coming months...overall, the lack of new domestic business activity will continue to overshadow declining external demand for US goods and services throughout the remainder of 2008 and into 2009.'

It also added that the US Treasury bond market has fully priced in a deep contraction in Q4 GDP and a very weak start to 2009.

Investors should not forget the not-insignificant problems faced by the US auto industry and the very real likelihood of Detroit, like Iceland a couple of months ago, going bankrupt.

In addition, the US housing market shows no signs of recovery and could in fact be worsening.

Alan Abelson of US newspaper Barron's reports in the Nov 24 issue that the latest victim is commercial real estate.

'The cost of buying protection against default of commercial-mortgage-backed securities has shot up in a notable hurry. The index that tracks such things has more than doubled since (Treasury) Secretary Paulson changed gears on the use of TARP (the US$700b Toxic Assets Rescue Plan that was scrapped recently)', wrote Mr Abelson.

'The yield on such paper with the highest credit rating is now a startling 12 percentage points above the yield on Treasury securities of comparable maturity.'

Our guess is that the Wall Street's bounce last week, supposedly in response to news that the Federal Reserve is to provide an US$800b lifeline for consumer debt was most probably mainly short-covering-induced, aided by a desperate attempt to window-dress the performance of a dismal month and/or year so far.

This process has been also assisted by 'buy' calls from some quarters on the basis that 'markets are oversold' (which in itself is no reason to buy when you really think about it if there are no earnings to speak of) and that all-time laughable classic, 'Asia is decoupled from the US and Europe's problems', which is a hackneyed soundbite trotted out every few years by a financial community that got it spectacularly wrong in 2008 and which can easily be consigned to the scrapheap by pointing out that throughout 2008, Asia has performed much worse than the US or Europe.

Looking further ahead into 2009 though, and you'd have to admit that with the Fed about to run its printing presses at full tilt, the sheer weight of US dollars being printed and thrown at the problem must sooner or later reflate the economy.

As an interesting side issue, it's worth noting that if the Fed were a commercial lender, it would be bankrupt by now. Elsewhere in Barron's Nov 24 issue it is reported that the Fed's capital adequacy ratio is now under 2 per cent, the threshold considered dangerously low.

As former president of the Cleveland Fed Lee Hoskins is quoted saying 'The Fed has violated two principal tenets of central banking - don't lend to insolvent institutions and don't lend on anything but the most pristine collateral'.

Our guess is that any recovery though, if it occurs, will only appear in late 2009 at the earliest. Until then, there will be the odd bear rally to provide some solace for battered bulls, bear rallies like the one seen last week. Investors should tread carefully or risk being caught in yet another bear trap.

-Research Report by R SIVANITHY (30 Nov)

Noble Group 281108

Noble Group has been on the rise since hitting a low of 0.660 on 20 nov. It has also broken the long term downtrend resistance (low red) today, testing the 1.01 resistance (blue --) too.

Has Noble Group formed a double bottom? By the looks of things at them moment, I'd be tempted to say yes. But knowing the erratic and often unpredictable trading patters of Noble Group, we would have to at least wait until Noble Group breaks the 1.10 neckline (red --) before we can safely say it has formed a double bottom.

We could see some profit taking (not forgetting it has been on the rise for the last 6 days), with Noble Group trading between the 1.01 resistance (blue --) and 0.900 support (red ...).


For monday :

Support @ 0.965 (mid blue, green --), 0.915 (low red), 0.900 (low pink, red ...), 0.855 (blue ...), 0.795 (pink --), 0.740 (low blue, pink ...)

Resistance @ 0.995 (upp pink), 1.01 (blue --), 1.05 (green ...), 1.065 (upp blue), 1.10 (red --), 1.115 (mid red)

Indofood Agri 281108

Is Indofood Agri trying to form a triple bottom? (1st bottom was on 18 sep) Indofood Agri recovered from a low of 0.390 on 26 nov, to test the 0.470 neckline (green --) today. It remains to be seen if Indofood Agri can successfully break this neckline this week.

If not, we could be looking at Indofood Agri trading between the 0.470 neckline (green --) and 0.420 support (pink --).


For monday :

Support @ 0.455 (upp pink, upp red), 0.435 (low blue), 0.420 (pink --), 0.410 (red --), 0.395 (pink ...), 0.390 (mid red)

Resistance @ 0.470 (green --), 0.495 (upp blue), 0.505 (blue ...), 0.535 (green ...), 0.575 (red ...)

China Hongx 281108

Two days on Doji for China Hongxing, and it's being pushed further into a corner formed by the long term downtrend resistance (upp red) and uptrend support (low blue). So we might see some action for China Hongxing this week.

If China Hongxing continues to trade within the downtrend channel (red), we could see it testing the 0.170 support (green --).


For monday :

Support @ 0.190 (lightblue --), 0.180 (lightblue ...), 0.178 (low blue), 0.173 (mid red), 0.170 (green --)

Resistance @ 0.190 (upp red, lightblue --), 0.196 (upp blue), 0.200 (blue --), 0.215 (blue ...)

A week spent tracking Wall Street, Citigroup

by R SIVANITHY (29 Nov)

A WEEK spent anticipating how Wall Street might perform later each day as well as wondering what Citigroup's fate might be. These in a nutshell are the major themes of the week just past, the other being that prices here may actually tend to lead Wall Street, rendering the Straits Times Index as possibly a better indicator of how the US market might move than even the US futures market.

Underpinning sentiment was mid-week news that the US Federal Reserve, which can basically print money if it sees fit, will extend a US$800 billion lifeline to distressed consumer debt markets to try and shore up the economy, and that the US government will essentially bail out Citigroup.

So far, Wall Street appears determined to take this as good news with its major indices responding positively, though it has to be stressed that bear rallies can appear deceivingly strong as many have turned out to be this year and there is no reason to expect this time to be any different.

Here, the Straits Times Index firmed by 70 points or 4.2 per cent over the course of the week to 1,732.57 with yesterday's session contributing 22.05 points.

Much of yesterday's gain could be attributed to month-end - and for some fund managers possibly even year-end - window dressing, while the same can possibly be said of markets everywhere.

All three banks benefited from this propping-up exercise, though DBS, despite being pushed up by 33 cents yesterday, still lost a nett 20 cents over the week at $9.40.

In a Thursday overview on Asia-Pacific banks, Merrill Lynch said it is cautious on Singapore banks because of potential negatives such as 1) slowing loan growth 2) a drop in market-related fees and 3) a cyclical rise in credit costs, all of which could depress 2009 earnings.

'The sector trades at mid-cycle valuations - 1.4x book - but that is not 'cheap' in our view given we are entering a down cycle,' said ML. It rates DBS and OCBC as 'underperform' and UOB as 'neutral'.

Keppel Corp, however, yesterday collapsed 60 cents or 12.5 per cent to $4.20 with 27 million shares traded following news that its customers are reviewing their options for $1.2 billion worth of orders.Possibly also a factor was a Wednesday downgrade by Merrill Lynch, which cited concerns about Keppel's exposure to property, oil refining and telecoms.

In a Thursday update, ML said although the impact on earnings is minimal, the news is likely to put a dent on investor confidence in the security of Keppel's current order book. 'If the sector experiences a deep and prolonged slowdown, (Thursday's) announcement is likely to be a sign of future order cancellations,' said ML. For the week, Keppel lost a nett 40 cents or 8.7 per cent.

In his weekly roundup, AMP Capital's head of investment strategy Shane Oliver, said 'while all the activity by governments around the world to get their financial markets working again and stimulate their economies won't head off the recession which is already in train, it does provide confidence that there will be an eventual economic recovery . . . While it's too early to say whether the bear market is over, there is still a good chance shares will rally into year end.'

-Research Report by R SIVANITHY (29 Nov)

Quiet session ahead of Wall St closure

by R SIVANITHY (28 Nov)

Local stocks likely sold on event after having been bought in anticipation of US Wednesday rally

THERE are two features of interest associated with yesterday's 0.61- point drop in the Straits Times Index (STI) to 1,710.52. First, the strong likelihood that investors 'bought in anticipation and sold on news' - on Wednesday, the Straits Times Index jumped almost 60 points, of which 40 came in the final few minutes because of sudden expectations that Wall Street would rally that day.

Because a rally did materialise and possibly because the US market is closed on Thursday for Thanksgiving, this then provided the cue to sell, with the STI falling at one point almost 20 points into negative territory.

Second, the fact that Wall Street rose on Wednesday as expected confirms a long-held view expressed in this column that program trading targets this part of the world ahead of the US - the correlation between movements in the STI and the Dow Jones Industrial Average on any given day has been near-perfect for several months now.

Whether this is thanks to synchronised short-covering or whether the STI is singled out for special treatment because of the ease with which it can be manipulated are matters for conjecture; suffice to say that there can be little doubt that as an advance indicator of how US stocks might perform later on any day, the STI's movements are possibly an even better indicator than the US futures market.

Turnover continued to hover below the $1 billion mark, a threshold loosely defined as signifying thin trading. Excluding foreign currency issues, 1.1 billion units worth $952 million were done, the low unit value suggesting penny stocks were more in demand than the larger-cap blue chips.

Among the actives was China shipyard Cosco Corp, a company that could do no wrong last year but one that has fallen on tough times lately.

In downgrading Cosco to 'underperform', Merrill Lynch (ML) in a Nov 26 report said the outlook for order cancellations combined with a sharp drop in the Baltic Dry Index are now painting a more negative outlook for the shipping industry than previously anticipated.

'We cut Cosco's order book by 25 per cent to account for potential order cancellations, reduce our order wins assumptions and reduce our freight rates ... and reduce our price objective to 55 cents a share. We have also cut our FY08-10 earnings estimates by an average of 25 per cent,' said ML.

Cosco yesterday was unchanged at 71.5 cents with 25 million shares traded.

The US investment bank also downgraded Keppel Corp from 'buy' to 'neutral'. In a Nov 26 report, it said the risks associated with Keppel's subsidiary and associate earnings will continue to be a drag on its shares.

'ML Singapore property analysts are not ready to call the bottom for property stocks as the economic outlook remains depressed. Valuation metrics are extremely volatile as the economic climate continues to deteriorate, while we see no catalyst to sustain a re-rating in stock prices,' said ML. Keppel yesterday rose six cents to $4.80 with 8.2 million units done.

In its latest assessment of US economic data, Ideaglobal said there have been signs of weakness for some time but recent events in financial markets have made a bad situation significantly worse.

'At this point, there is no debating whether or not we are in a recession, it has now transformed into a question of how deep and painful it will become,' said Ideaglobal.

-Research Report by R SIVANITHY (28 Nov)

Late surge in anticipation of US rally

by R SIVANITHY (27 Nov)

ST Index closes 58 points higher, but broad market shows only 159 rises versus 137 falls

JUDGING by the Straits Times Index's (STI) 57.88- point rise to 1,711.13 yesterday - the bulk of which came in the final five minutes - program traders were positioning themselves for an expected Wall Street rally later in the day.

The broad market, however, did not fare as well as the index. Excluding STI components and warrants, there were only 159 rises versus 137 falls in the wider market.

The STI owed much of its last-minute gain to a 16-cent rise in SingTel that accounted for 17 points. Of this, 10 cents came in the post-closing adjustment period between 5-5.05pm.

Brokers continued to speak of caution among clients and this was reflected in low volume. Excluding foreign currency issues, only 864 million units worth $931 million were traded.

Among banks, DBS first fell to $9.01 but ended unchanged at $9.20, while UOB's 70-cent jump to $12.60 added 11 points to the index. Brokers speculated that investors were switching from one to the other, possibly because of fears that DBS might call for a rights issue, worries that have arisen because Standard Chartered Bank recently announced a rights issue.

In the second line, Jade Technologies' shares, which cost 30 cents this time last year, closed half a cent lower at 1.5 cents. The company on Tuesday reported a $39 million loss for the full year ended Sept 30. At 1.5 cents a share, Jade's market capitalisation is about $17 million.

Most trading activity was focused on battered commodity plays like Golden Agri, Indofood Agri and Olam International, as well as China stocks that have collapsed significantly from their highs such as China Hongxing, Cosco and Yanlord.

Elsewhere, Bright World's shares lost three cents to 24.5 cents after news that the Monetary Authority of Singapore has written to the company about a possible breach of the Securities and Futures Act.

In a report on the telco sector, OCBC Investment Research said: 'Going into 2009, the whole stock market will continue to face many challenges, most of them coming from the macroeconomic front.

In such a highly unpredictable climate, we believe that a flight to quality is not enough - investors should also focus on defensiveness of earnings as well as sustainable dividend payout abilities and Singapore's telcos meet these criteria. As such, we continue to maintain our 'overweight' rating on the sector.

'While earnings are expected to take a slight knock next year due to the recession, we do not expect the slowdown to have much of an impact, if any, on the telcos' healthy operating cashflows. If anything, we expect more prudent capex spending and other cost-reduction measures to further improve operating cashflows and, in turn, sustain the already attractive dividend policies.'

In its 2009 Outlook report, ratings agency Standard & Poor's (S&P) said that for Asia-Pacific equity markets, a rebound is likely in 2009.

Its director of research Lorraine Tan believes markets are in the process of bottoming. 'Although the economic and corporate news is likely to remain negative - and uncertainty still pervades the global financial system - we see that markets will have retraced in line with, and in some cases exceeded, movements in previous bear markets in terms of both value and time frame,' said Ms Tan.

S&P also said 'ongoing market dislocation will significantly impact Asia-Pacific in 2009, but factors such as intra-regional trade, supportive policy-making, and still-robust forecasts for China and India will help the region navigate the global storm'.

-Research Report by R SIVANITHY (27 Nov)

Investors continue to sell into strength

by R SIVANITHY (26 Nov)


SELLING into strength has been the preferred strategy over the past year and so it was again yesterday - the Straits Times Index first shot up 70 points in response to Monday's Wall Street rally but eventually closed just 32.96 points up at 1,653.25. It stood at 1,640 at 5pm but gained about 12 points in the post-closing adjustment period, mainly through a last-minute push on DBS and Keppel Corp.

The broad market was much more mixed than the index's reading would suggest - excluding foreign currency stocks, warrants and STI components, there were only 150 rises versus 148 falls.

Talk to dealers and the picture they would paint about the state of the local stock market remains the same as it has been for months now - stocks remain trapped within narrow bands with rallies viewed as bear traps and volume dwindling as a result.

Further afield there was worry that although the US government is bailing out Citigroup - news of which propelled Wall Street on Monday - there may be more large-scale failures yet to come in both the financial and motor industries.

As always, the local index's fortunes were dictated by Hong Kong, where the Hang Seng was firm throughout the day but was unable to add significantly to its 4 per cent gain that was attained early in the morning.

Among blue chips it was the banks which led the way, though all were off their highs. Similarly, SingTel rose 7 cents to $2.55 in the morning but finished one cent weaker at $2.47.

DMG Research said in a chart view on the STI that it believes a break below the 1,600-1,717 region implies the the index is headed for the 1,391 level by January. 'As for our weekly short-term view for the STI, we believe any rebounds should be short-lived. . .additionally, the 14-day RSI (relative strength index) still hovering above the 30 level also suggests that the STI is not yet oversold. Support is set at the 1,570-1,580 area. . .' said DMG.

In its Weekly Flow Investment Strategy Update dated Nov 20, Merrill Lynch said cash is king for now. 'But it's getting cheaper and cheaper: a typical US money market fund yields 0.73 per cent, meaning it would now take 95 years to double your money in it.'

It says it believes that among the catalysts cash-heavy investors are waiting for are lower volatility and spreads and the completion of big EPS downgrades. February is the earliest one can envisage all of them coinciding.

Meantime, investors were urged to watch credit spreads, for signs of credit-crunch easing, inventories for signs that the violent collapse in economic momentum is ending and A-shares, for signs that Chinese policy stimulus is working.

In its latest Economics & Strategy report dated Monday, Henderson Global Investors said that it is inherently difficult to call market bottoms but one signal is to look for the trend in leading economic indicators (LEIs).

'Plunging business and consumer confidence suggest the US, UK, Euro-zone and Japanese economies will experience a severe recession. . .the rapid deterioration in the economic outlook for Europe and the UK is likely to lead to more interest rate cuts in the coming months.'

Henderson also said recessions and periods of de-leveraging are almost always associated with falling inflation. However, the risk of headline deflation has increased substantially, said Henderson.

-Research Report by R SIVANITHY (26 Nov)

Olam 251108

After opening above the downtrend resistance (mid grey), Olam weakened quickly and broke the 0.960 support (green ...) and 0.930 support (green --). Olam closed right on the 0.900 support (pink --). Moreover, today's break down was accompanied with volume.

The last time Olam traded below the 0.900 level was on 28 oct (0.835 low). If Olam breaks the 0.900 support, we could see it revisit this low. Would that have completed the double-bottom formation?


For tomorrow :

Support @ 0.900 (pink --), 0.835 (28 oct low), 0.813 (low grey)
Resistance @ 0.930 (green --), 0.945 (mid grey), 0.960 (green ...), 1.00 (blue --), 1.015 (low red)

Noble Group 251108

Noble Group continues to trade within the uptrend channel (blue), even testing the 0.795 neckline (pink --), uptrend resistance (mid blue), and downtrend resistance (mid pink), before ending the day below the long term downtrend resistance (low red).

Based on the volume distribution bars on the left, Noble Group also seems to have build up quite a support base at the 0.740 level (pink ...). However, we could see this base being severely tested in the next few days.

If Noble Group manages to hold onto this support, we could see attempt to break the 0.795 resistance (pink --) again. However, if Noble Group breaks the downtrend support (low pink), we could see it test the 0.685 support (red --).


For tomorrow :

Support @ 0.740 (pink ...), 0.7185 (low pink), 0.705 (low blue), 0.685 (red --)
Resistance @ 0.760 (low red), 0.795 (pink --), 0.803 (mid pink), 0.820 (mid blue), 0.855 (blue ...)

Indofood Agri 251108

There was joy (for the longists) initially when Indofoor Agri opened on the 0.420 neckline (pink --), breaking the long term downtrend resistance (upp pink) at the same time. Indofood Agri even came close to testing the downtrend resistance (mid red).

However, as the day went on, things began to take a turn for the worse when Indofood Agri began reversing, giving up its gains, breaking the 0.420 and 0.410 necklines. Indofood Agri then finished the day by closing right on the 0.395 support (pink ...).

If Indofood Agri breaks the 0.395 support, we could see it testing the end oct lows of 0.375 (blue --) again.


For tomorrow :

Support @ 0.395 (pink ...), 0.375 (upp pink, blue --), 0.370 (low red), 0.315 (mid pink)
Resistance @ 0.410 (red --), 0.420 (pink --), 0.425 (mid red), 0.470 (green --), 0.495 (upp red)

Cosco 251108

Could Cosco be forming a double-bottom? Although Cosco has not broken the 0.755 resistance (blue ...) yet, it managed to keep off the uptrend support (low blue) and 0.670 support (pink --) these 2 days.

We could see some action for Cosco towards the end of the week when the long term downtrend resistance (mid pink) meets the uptrend support (low blue) and 0.670 support (pink --).

If Cosco breaks these 2 supports, we could see Cosco re-vsiting 3-year lows.


For tomorrow :

Support @ 0.670 (low blue, pink --), 0.600 (low pink)
Resistance @ 0.730 (min pink), 0.755 (blue ...), 0.785 (upp blue), 0.795 (green ...), 0.815 (red --)

China Hongx 251108

China Hongxing continues to trade (more or less) between the 0.180 support (lightblue ...) and 0.190 resistance (lightblue --), probably trying to form a base. However, China Hongxing has been closing low the last 2 days, So I'm not sure how long more the 0.180 support can hold.

If the support breaks, the selling could come fast and furious, and China Hongxing could re-test the end oct lows.


For tomorrow :

Support @ 0.180 (low blue, lightblue ...), 0.170 (green --), 0.165 (mid red), 0.140 (low red)
Resistance @ 0.190 (lightblue --), 0.197 (upp blue), 0.200 (blue --), 0.205 (upp red)

Market starts week on weak note

by CONRAD TAN (25 Nov)

UOB and DBS are main drags on STI; gains by heavyweights SingTel and KepCorp help limit index's losses

STOCKS here started the week on a sour note yesterday as two of the world's biggest banks scrambled to raise capital, adding to fears that the unfolding economic crisis worldwide is taking its toll on even the biggest names.

The Straits Times Index (STI) finished 41.81 points or 2.5 per cent lower at 1,620.29, after slumping 2.6 per cent earlier in the day. United Overseas Bank (UOB) and DBS Group were the main drags on the index.

Around the region, bank stocks suffered after Standard Chartered Bank said it would raise £1.8 billion (S$4.1 billion) through a rights issue to boost its capital base and the US government agreed to bail out Citigroup by injecting US$20 billion into it and insuring up to US$306 billion of its troubled assets.

Here, UOB finished 3.8 per cent lower at $11.26, DBS fell 3.4 per cent to $9.27 and OCBC Bank ended 1.1 per cent down at $4.55.

In a report yesterday, DBS analysts said they remain 'cautious' on the local banking sector, despite the boost from the government's initiative announced last week to support lending to small and medium-size enterprises (SMEs).

'We believe this move by the government will ease credit worries, alleviate default risk of SMEs and restore confidence in the availability of credit to SMEs,' they said. Still, 'the key concerns ahead would be the extent of asset quality weakness the banks might face'.

Olam International, a supplier of agricultural commodities worldwide, led yesterday's blue-chip declines in percentage terms. It fell 7 per cent to 93 cents, revisiting last Wednesday's low. The stock has slumped 66.9 per cent this year amid a broader slide in commodity-related stocks, as the world's biggest economies tip into recession, hurting demand for a range of commodities.

But Hong Kong-based Noble Group, which manages global supply chains in food, energy and metals, defied the broader market yesterday, rising 0.7 per cent to 74.5 cents after slumping badly last week. For the year, the stock is still down 63.2 per cent.

Chinese shipyard operator Cosco Corp was the second-biggest loser in percentage terms among STI members, falling 6.8 per cent to 68 cents.

Of the STI's 30 component stocks, 25 fell, four rose and one finished unchanged. Index heavyweights SingTel and Keppel Corp were among the gainers, which helped limit the STI's losses. SingTel rose 1.2 per cent to $2.48 and KepCorp finished 0.2 per cent higher at $4.61.

Outside the STI, the broader market was also weak. Losing counters outnumbered gainers 284-108 overall, with 930 counters unchanged, excluding warrants and bonds. Trading volume was abysmally low.

Just 790.4 million units worth $650.3 million changed hands, compared with Friday's volume of 1.17 billion units worth $971.6 million. That includes warrants and bonds but excludes shares traded in foreign currencies.

CapitaCommercial Trust fell 8.2 per cent to 73 cents after the property trust said on Friday it was pursuing its refinancing needs with several financial institutions. A Reuters report that day suggested the trust had asked four banks to arrange $580 million in refinancing.

The FTSE ST All-Share index, which tracks 268 of the most liquid stocks listed here, fell 2.5 per cent yesterday, while the UOB Catalist index of stocks on the second board dipped 1.5 per cent.

Elsewhere in the region, most stock indices also ended lower, except in Japan where markets were closed for a public holiday. Hong Kong's Hang Seng Index slid 1.6 per cent.

-Research Report by CONRAD TAN (25 Nov)

STI likely to consolidate further

by Ken Tai Chee Ming, CMT senior technical strategist, KELIVE RESEARCH (25 Nov)

BASED on Elliot Wave theorem, the Straits Times Index is currently trending in Wave-B downtrend of its Wave-4 cycle. At the macro front, the decline in commodity and oil prices is making a positive impact on the US external deficit and US dollar strength.


Coupled with the rising aversion to global risk, there is anecdotal evidence to suggest that US capital outflow to Asia is slowing down somewhat as funds re-balance their weightings in favour of US dollar assets.

If this prognosis is accurate, then Asian markets will likely consolidate further as the US dollar strengthens. For Singapore, MAS's shift towards a zero appreciation policy for the Sing dollar on Oct 9 had led to speculative shorts on the Sing dollar.

To date, the Sing dollar/US dollar exchange rate has depreciated from $1.47 to $1.53; the next resistance to watch is $1.543, followed by $1.592. We believe currency exchange levels will have a deterministic role in this phase of the STI's consolidation with index support at 1,570.

While it could be a wait before the Wave-C rebound arrives, potentially, a breakout of the recent 1,933 high achieved this October is plausible.

-Research Report by Ken Tai Chee Ming, CMT senior technical strategist, KELIVE RESEARCH (25 Nov)

Technical view on ST Index

by DMG AND PARTNERS SECURITIES (25 Nov)

STRAITS Times Index (STI): Edging closer to the 1,391 level.

We have previously noted that the STI is set to fall due to the Symmetrical Triangle pattern that had formed. While the STI did eventually drop 10.7 per cent to its intraday low of 1,570 during the previous week, we had underestimated the magnitude of the decline as we had expected the index to 'consolidate with a bearish tone' - the breakout move out of the Triangle had taken place slightly earlier than we have anticipated.

We had also mentioned that the break below the 1,600-1,717 region would imply that the index is set to target the 1,391 mark to complete the 161.8 per cent move of Wave A. While this view remains and with the STI still in the midst of a Wave C, we now note that this level should be attained by January.

As for our weekly short-term view for the STI, we believe that any rebounds should be shortlived. With the potential bearish moving average crossover on the MACD chart looming, the breakout move from the Triangle looks poised to continue. Additionally, the 14-day RSI is still hovering above the 30 level, suggesting that the STI is not yet oversold.

Support is set at the 1,570-1,580 area which is in line with the lower bollinger band while resistance is derived at the 1,760-1,770 range as depicted by the confluence of the 14- and 21-day moving averages.

-Research Report by DMG AND PARTNERS SECURITIES (25 Nov)

The End Is Near?

Is the market finally turning around? Depends on how you look at it. Saw this cartoon on Newsweek. Really sums up the situation now.


Different people, different perspectives.

More than just rig builders

by VINCENT WEE (24 Nov)

LOOKING at the one-year price charts of SembCorp Marine, Keppel Corp and the benchmark crude oil grade, a close correlation appears.

Both SembMarine and Keppel Corp hit highs of $4.61 and $12.34 respectively on June 2, when the price of crude oil was on an unprecedented uptrend and just a month before it hit an all-time high of over US$147 in July.

When the oil price started sliding below US$100 per barrel after that high point, the stock prices of the two counters followed suit. And when oil prices briefly spiked back up above US$100, the stock prices of the two counters mirrored this movement, albeit on a much smaller scale.

With oil falling below US$50 last Thursday, the prospects for the two counters look poor if investors were to assume that the correlation will hold. However, the fundamental question that needs to be asked is if that rationale for the correlation was valid in the first place.

Firstly, new order announcements have slowed, not stopped, in the second half. Keppel Offshore and Marine managing director and chief operating officer Tong Chong Heong was recently quoted as saying that the group had 'not yet reached a point of panic' because most of its projects were properly funded and the yards had work all the way till about 2012 to 2013 with a net order book of $13 billion as at Sept 30.

Trying to pin down an oil price at which continued investment in new rigs will stop is at best an academic exercise. But the fact remains that demand for oil will continue to rise and so will the demand for rigs needed to find that oil.

According to a recent report by Ocean Shipping Consultants, even in a low case (price) scenario, offshore oil production is forecast to increase by 39 per cent between now and 2020.

The other key fact is that even as oil demand increases, the supply of rigs will not keep pace. Over 65 per cent of the global mobile rig fleet is over 25 years old and should be due for scrapping but owners have deferred this due to high current charter rates. New building orders account for just 20 per cent of the current offshore rig fleet.

Secondly, while both companies are known as rig builders accounting for more than two-thirds of global newbuilds and while it seems that the big rig deals with impressive headline numbers have tapered off, it should be realised that this is not all that they can do. For example, each of them are also recognised ship repair and conversion yards in their own right.

In fact, the margins on some of the other less attention-grabbing jobs they undertake are actually better than the rig jobs. Repair and conversion jobs see average margins of 25-30 per cent while the usual margin on a rig newbuild is no more than 10 per cent.

Nonetheless, contracts continue to trickle in and the type of jobs being secured seem to be indicating just such a shift.

Keppel announced several conversion and fabrication contracts worth a total of $340 million last week. SembMarine's most recent contract for the first in a series of LNG carrier life extensions was just last month.

DMG and Partners analyst Serene Lim notes in a recent report on SembMarine that 'the repair and conversion business division is counter-cyclical in nature'.

'In this weak credit market whereby we could possibly expect slowing new order momentum, we believe this non-rig building segment is likely to bring in relatively stable revenue stream.'

' We noted that historically, these combined revenue contributions from repair and conversion projects had been increasing through these years, $1.4 billion in FY05, $1.5 billion in FY06 and $1.9 billion in FY07,' she adds, maintaining her 'buy' call and a target price of $2.49.

OCBC Investment Research's Kelly Chia, meanwhile, resumed coverage of Keppel with a 'buy' call also and a fair value price of $5.20.

-Research Report by VINCENT WEE (24 Nov)

Next week 24 - 28 Nov Data

US DATA

Nov 24
Oct existing home sales

Nov 25
Chain deflator - Q3
preliminary results
GDP - Q3 preliminary
Nov consumer confidence

Nov 26
Oct durable orders
Initial job claims
Oct personal income
Oct personal spending
Nov Chicago PMI
Oct new home sales

SINGAPORE DATA

Nov 24
Oct consumer price index

Nov 26
Oct index of industrial production

Nov 28
Oct central government operations
Oct producer and international trade price indices

Week shows the worst not over

by R SIVANITHY (20 Nov)

NOTWITHSTANDING yesterday's short - covering bounce, the week just passed has served as a grim reminder to investors everywhere that the worst is not yet over for equities.

Wall Street's collapse throughout the week on deflationary worries as oil prices continued to crash, Citibank's plummet to US$4.71 per share on Thursday on worries about its future, the likelihood that General Motors might go bust, the awful US jobless and housing numbers, the US Treasury abandoning its supposedly crucial US$700 billion bailout plan - the list goes ever on.

Whatever the case, few observers placed any faith in yesterday's 48.15-point gain for the Straits Times Index (STI), most probably taking the opportunity to sell into short-covering strength.

For the week, the STI lost 97 points or 5.5 per cent to 1,662.10, falling continuously between Monday and Thursday. Not surprisingly, banks were hit again - DBS started the week at $10.34 but ended at $9.60 for a loss of more than 7 per cent, UOB's loss was one per cent and OCBC's 6 per cent.

Daiwa Institute of Research's Nov 19 report on the banks probably summed it up best when it said there is no reason to change its negative view on the sector after the Q3 results. 'We believe the quarterly net profit declines (average of 23 per cent) experienced by all banks for Q3 are a precursor of the weak operating conditions they face in 2009 and 2010,' said Daiwa.

Morgan Stanley (MS), in the meantime, said in its Nov 19 Asia Pacific Banks report that it has identified 39 banks in its regional coverage that may require some form of equity raising (ordinary equity issuance, dividend policy change, divestment, etc), to just increase their core equity tier one ratio to at least 9 per cent which amounts to about US$80 billion in new equity.

'The US$80 billion does not include capital strain/destruction from the emerging credit cycle and macro slowdown. At this stage, we have no clear view on the likely depth and breadth of these cycles, but suffice to say US$80 billion is unlikely to be enough.

Moreover, as the developed world moves to higher levels of absolute capital adequacy, will rating agencies and capital providers require Asia to maintain the previous relative gap ... ie, is even 9 per cent core equity tier one enough?' asked MS.

In his weekly roundup, AMP Capital's strategy head Shane Oliver said with the US's leading indicator of economic growth at its lowest reading in over 15 years, the worsening outlook means the US Federal Reserve will have to cut its short-term interest rates again at next month's meeting.

Next week, Wall Street will be closed on Thursday for Thanksgiving but will have to deal with a barrage of economic reports such as home sales, house prices, consumer confidence and durable goods orders.

As for the local market, DBS Vickers yesterday released a Singapore Market Focus entitled 'Cautious' in which it said with earnings deteriorating and assuming a recession with -2 per cent GDP growth, the STI could test 1,250.

-Research Report by R SIVANITHY (20 Nov)

More selling as recession fears mount

by R SIVANITHY (20 Nov)

ST Index sheds 3 per cent as part of region-wide stocks hammering after Wall Street dives

WALL Street's 5 per cent plunge to a five-and- a-half-year low on Wednesday sent stocks in this part of the world tumbling yesterday, serving a grim reminder to investors everywhere that the worst is not over for equities.

The US market's rout came after the release of more poor economic numbers, including thin housing starts and low consumer prices - with both figures fuelling deflationary worries.

Adding to the gloom yesterday was news that Japan's exports fell the most in six years, confirming that the global slowdown is taking a firm grip.

The result was a 4 per cent slump in Hong Kong's Hang Seng Index and a 51.64-point or 3.1 per cent loss for the Straits Times Index to 1,613.95, taking it about 13 points above its most recent low of 1,600.28, reached on Oct 24.

Banks were again hit. All three closed weaker, led by DBS's 34-cent slide to $9.16. Daiwa Institute of Research said in a Wednesday report on Singapore banks that it sees no reason to change a previous 'negative' view of the sector.

'We believe the quarterly net profit decreases (an average of 23 per cent) experienced by all banks for Q308 are a precursor of the weak operating conditions they will face in 2009 and 2010,' Daiwa said.

'We believe the sector is set for another depressing industry-wide decline of 8.2 per cent year-on-year for 2009, led by further year-on-year declines in fees and other income and a flare-up of loan-related allowances.' It maintained its 'underperform' ratings on UOB and OCBC, and a 'hold' on DBS.

Government-linked conglomerates continued to be sold down yesterday, though Keppel Corp managed to close unchanged at $4.49 after touching $4.30. Sembcorp Industries (SCI) dropped 12 cents to $2.03, while Sembcorp Marine (SMM) fell 15 cents to $1.65.

In a Nov 18 report, Deutsche Bank maintained a 'buy' on all the three stocks, with price targets of $7.80, $3.55 and $2.45 for Keppel, SCI and SMM respectively.

'While near-term uncertainties remain due to the global financial and economic turmoil, we believe long-term trends remain intact for the offshore and marine sector and through a flight to quality, may likely see future orders gravitate towards the more established players,' said Deutsche.

Credit Suisse maintained its 'underweight' rating on Singapore in a Nov 19 strategy report, saying 'low solvency risk does not mean no risk'. It did state, however, that Singapore Inc is well-placed to weather the storm because corporate debt at 32 per cent for FY08 is easily manageable.

In his latest Insights, AMP Capital's strategy head Shane Oliver said recession is now advanced in key developed economies such as Japan and Europe, and it is only a matter of time before the US officially declares that it too is in recession.

He also said that although there are some common features, this is not a normal slump that typically comes as part of a boom-bust cycle.

'Two considerations make this global slump potentially more serious and hence add to the level of uncertainty,' he said. 'First, we are faced with significant systemic risk as the flow of credit has been radically impaired. On top of this, most countries are weakening at the same time. The synchronisation in economic downturns in the US, Japan and Europe is now making the global downturn worse.'

-Research Report by R SIVANITHY (20 Nov)