Indofood Agri 311008

Indofood Agri opened and broke the downtrend resistance (upp pink) and long term downtrend support (low red) with volume today. It also tested the 0.525 neckline (pink ...) before closing at 0.505 (16 oct opening price).

Can Indofood Agri maintain its uptrend momentum and break the 2nd long term downtrend resistance (upp red)?

If Indofood Agri maintains its trading above the 0.495 support (blue ...), we could see it test the 2nd long term downtrend resistance (mid red) next week.

However, if Indofood Agri breaks the 0.485 support, we could see it trading sideways between 0.485 support and 0.425 support (pink ---).



For monday:

Support @ 0.505 (upp blue), 0.485 (blue ...), 0.475 (mid blue), 0.425 (pink --), 0.420 (low blue, low red), 0.379 (upp pink)

Resistance @ 0.525 (pink ...), 0.555 (upp red), 0.600

Cosco 311008

Cosco has managed to recover somewhat from its low of 0.605 on 17 oct. Although Cosco tested several downtrend resistances today, it still closed below them, especially the long term downtrend resistance (low pink).

It would be important to see if Cosco can maintain trading within the short-term uptrend channel (blue) which I've just added. Of more importance would be to stay above the 0.765 level, where the long term downtrend resistance (low pink) meets the uptrend support (low blue).

If Cosco can break the 0.890 level (upp red meets upp blue), next resistance can be seen around the 0.985 neckline (red ...).



For monday :

Support @ 0.762 (low pink, low blue), 0.755 (blue ...), 0.733 (mid red), 0.681 (low red)
Resistance @ 0.800 (red --), 0.870 (upp blue), 0.903 (upp red), 0.985 (red ...)

Offshore and Marine Sector Research Report

by CIMB-GK RESEARCH (21 Oct)

IS the bubble bursting? Offshore & marine stocks have been under pressure for several months, falling by more than 70 per cent YTD.

The drop mirrors falling oil prices on the back of a troubled economy and shrinking demand, worsened lately by tight global credit which has increased insolvency risks among shipowners and offshore operators. Singapore big caps in the offshore & marine sector - SembCorp Marine and Cosco Corp - have not been spared in the stock sell-down.

We see more frantic sales of unchartered assets in the market where operators are pushing back their newbuild plans and starting to look for bargain units built for speculation.

A recent decision by Atwood Oceanics not to exercise its option for a third semi-submersible with Semb- Marine could be a key sign of the start of a rig downcycle. While we had expected orders to slow down even before the credit crisis, it now looks like the credit turbulence could hasten the slowdown of orders going into 2009.

Earnings growth for 2009 has been secured by orders but growth beyond that could be at risk if the order momentum decelerates faster than expected.

The adverse credit market has triggered occurrence of bankruptcies, unstable credit lines and higher lending spreads. We are cutting our order assumptions for 2009-10 by 13-44 per cent for SembCorp Marine. With our blanket cut, we are downgrading our earnings estimates by 6-12 per cent for SembCorp Marine.

Downgrade sector to 'neutral' from 'overweight'; SembMarine remains our top pick. Maintain 'outperform' on SembCorp Marine as it is trading below its 10-year trough valuation of about 10x P/E.

Maintain 'underperform' on Cosco.

-Research Report by CIMB-GK RESEARCH (21 Oct)

SPC 221008

The 1st hint of warning came on 6 oct when SPC broke the 4.27 neckline support (blue --). Confirmation came the next day when SPC broke the long term downtrend support (low red) and downtrend support (mid grey) with volume.

As you can see from the chart, SPC spiralled down after that and the highest it came back to was to test the downtrend resistance (mid grey) again on 14 oct. I've just added in the short-term downtrend channel (black). After 15 oct, SPC never closed above the downtrend resistance (mid grey).

Today, it gapped down and opened right on the short-term downtrend resistance (mid black), more importantly, it broke down with volume, just like it did on 7 oct.

As it stands now, things don't look too good for SPC. There could be some sideway tradings but I guess it's going to trend within the downtrend channel (black).



For tomorrow :

Support @ 2.57, 2.31 (low black)
Resistance @ 2.64 (mid black), 3.01 (pink --), 3.07 (low grey, upp black)

Downside looks limited at this juncture

by KEN TAI CHEE MING,
technical analyst
KELive Research (21 Oct)

But the long-term downtrend for ST Index remains

OUR long-term view of the Straits Times Index (STI) has not changed; we maintain that the STI will likely consolidate around 1,665. For short-term traders, a trading window may now open up, given new peaks attained by the VIX index, which measures expectations of near-term market volatility.

Since the VIX index was made available by Prof Robert E Whaley, it has never exceeded 80 points. Even in crisis years such as 1998 and 2001, the VIX only managed to hit 49. Our optimism for a bear rally occurring is also supported by several technical indicators.

The RSI moved into an extreme oversold range in the first week of October. If the RSI holds above 19, a bullish divergence will be formed.

At a secondary level, the plus directional movement indicator remains below the minus directional movement indicator. The ADX is also declining, suggesting that negative momentum is easing.

In all, we believe that the downside is limited at this juncture as negative news is priced into the market, at least in terms of the economic fallout from the credit crunch.

Notwithstanding that, the long-term downtrend is not over. As the recession gets underway, the market will again adjust its sentiment based on the state of the economic data.

As oil and commodities trend lower, related stocks are also reflecting the downtrend. We see further weakness in STX Pan Ocean and Mercator as the Baltic Dry Index goes near six-year lows.

-Research Report by KEN TAI CHEE MING,
technical analyst
KELive Research (21 Oct)

SPC Q3 profit plunges 99%

SINGAPORE - Singapore Petroleum Co on Tuesday reported a 99 per cent fall in quarterly net profit and said it expected to continue being affected by the global financial crisis and oil price volatility.

The oil refining and marketing firm said it earned S$619,000 (US$$418,000) in the three months to the end of September, compared with S$98.1 million a year earlier.

According to Reuters calculations, refining margins in Singapore for complex units cracking benchmark Dubai crude made an average of US$5.80 a barrel in the third quarter, historically decent but below the US$7.18 average of the past year.

Margins rose in September as benchmark US crude oil prices plunged from a record near-US$150 a barrel in July to around US$100 by the end of the quarter.

Shares in SPC fell 29 per cent in the quarter, versus a 20 per cent fall in the benchmark Singapore index in the same period.

Keppel Corp, the world's number-one offshore oil drilling rigs builder, owns 45 per cent of SPC, which equally shares ownership of a 285,000 barrels a day refinery in Singapore with US oil major Chevron.

Semb Marine 171008

After opening below the downtrend support (mid black, mid red) on 16 oct, Sembcorp Marine went on to quickly demolished the 1.85 (18 apr 2005 low) support and closed on the downtrend support (low pink).

Today was just as bad as Sembcorp Marine even broke the 2nd downtrend support (low black), closing right on the long term downtrend support (low red).



We can see the downtrend support (low black) meeting the long term downtrend support (low red) around the 1.54 level sometime next week. If these 2 supports fail to hold, we could see Sembcorp Marine heading for the 1.40 level as indicated by the downtrend support (low black).



For Monday :

Support @ 1.547 (low red)
Resistance @ 1.58 (low black), 1.59 (green --), 1.69 (low pink), 1.76 (blue ...), 1.80 (mid black)

Olam 171008

A week ago, I mentioned that if Olam were to break the 1.40 support (blue --), we could see it testing the 1.30 level. This came only within 3 days, as we saw Olam breaking the 1.40 support on 15 oct, as well as the downtrend support (mid red, mid grey), closing on the 7 oct low of 1.22.



On 16 oct, Olam opened below the long term downtrend support (low pink) testing the 1.00 psychological level. We could see Olam trading between 1.00 and the downtrend resistance (low red) this week.

If Olam breaks the 1.00 level, we could see it hitting the 0.900 level as indicated by the downtrend support (low grey).



For monday :

Support @ 1.00 (green ...), 0.950 (low grey)
Resistance @ 1.138 (low red), 1.163 (low pink), 1.20 (mid grey), 1.22 (red ...), 1.25 (mid red)

Indofood Agri 171008

After the false break on 14 oct, things have now taken a turn for the worse for Indofood Agri as it has now broken the long term downtrend support (low red). Indofood Agri may have found some temporary support around the 0.410 - 0.415 band as indicated by the volume distribution bar (pink --) with about 1.5k lots done.

Big sell downs were around the 0.460 to 0.470 price band (total about 4k lots). Biggest buy up at 0.500 (1.5k lots)

The downtrend resistance (upp pink) meets the long term downtrend support (low red) at around the 0.450 level sometime next week. If Indofood Agri fails to recover above this level, we could see it weakening further, even testing the 0.300 level.



For monday :

Support @ 0.410-0.415 (pink --), 0.320 (mid pink), 0.205 (low pink)
Resistance @ 0.455 (low red), 0.470 (upp pink), 0.485 (blue ...), 0.525 (pink ...)

China Hongx 171008

After our discussion on 10 oct, China Hongxing tested the downtrend resistance (mid red) on 14 oct but failed to break it, and it closed on the 0.215 support (blue ...). The next day (15 oct) saw China Hongxing opening below the 0.215 support and breaking the crucial 0.190 support as well (lightblue --).

Also mentioned on 10 oct, we also saw China Hongxing almost testing the 20 feb 2006 low of 0.162 on 16 oct before covering to close on the 0.190 support again.

We should continue to see China Hongxing trade within the downtrend channel (red), more so as it has now broken the 0.190 support (lightblue --). We could even see it testing the 0.140 level as indicated by the downtrend support (low red).



For monday :

Support @ 0.160 (low red)
Resistance @ 0.190 (lightblue --), 0.205 (mid red), 0.210 (blue ...), 0.242 (upp red), 0.245 (pink --)

China Hongx Research Report

by CIMB-GK (15 Oct)

IN MID-NOVEMBER 2007, China Hongxing Sports placed out 400 million new shares at S$1.18 each to raise net proceeds of 2.3 billion yuan (S$493 million). The money was meant to fund its expansion plans.

Hongxing set aside 1.3 billion yuan from the proceeds to aid its distributors with the opening of 420 mid-sized stores from Q4 2007 till Q4 2008. The rationale for this was to secure key retail locations.

Under these arrangements, Hongxing secures leases for the distributors, who are obliged to pay first-year rentals in instalments over 12-15 months. After the first year, the leases are transferred to the distributors. These advancements are recorded as prepayments on Hongxing's balance sheet.

As at end-Q2 2008, Hongxing had advanced 962 million yuan to distributors to facilitate the establishment of 319 mid-sized stores. It had also collected 34 per cent of the 227.5 million yuan advanced in Q4 2007, in line with the 12-15 month repayment period. The last advancements to distributors will take place in the second half of 2008. Management says that the collection of advancements has been smooth.

Although we project negative free cash flow (FCF) for Hongxing for FY2008 due to the spike in its working capital and capital expenditure, we expect its FCF to turn positive in FY2009-2010, as the group starts to reap benefits from its expansion.

We project capital expenditure of around 480 million yuan over FY2008-2010, to be partly funded by placement proceeds. We believe that concerns over its negative FCF have been overplayed, given that it is still in a net cash position of about two billion yuan.

Earnings for the rest of the year should be bolstered by a strong order book of 1.5 billion yuan. Our TP remains based on eight times CY2010 PE, the lower end of its historical band.

-Research Report by CIMB-GK (15 Oct)

Another day of selling into strength

by R SIVANITHY (16 Oct)

ST Index's 69-point fall on Wednesday amid credit-market uncertainties wipes out all of Tuesday's gains

Market players seemed inclined to sell into strength, given the many uncertainties surrounding the coordinated government bailout of US and European banks and the magnitude of the coming slowdown.

This conjecture was based on Tuesday's trading pattern when stocks slumped late in the session - a pattern that was repeated on Wall Street on Tuesday and again in the local market yesterday, when the Straits Times Index (STI) dropped 68.92 points or 3.2 per cent to 2,059.39.

The fall erased all of Tuesday's 51-point recovery and came after a 5 per cent loss in Hong Kong's Hang Seng Index, an 80-point drop in the December Dow Jones Industrial Average futures, and a soft opening across Europe late in the afternoon.

Turnover excluding foreign currency issues was a relatively thin 1.1 billion units worth $1.2 billion, much lower than Tuesday's $2 billion. The broad market, excluding warrants and STI stocks, managed just 97 rises versus 330 falls.

'Investors are still very jittery and prefer to sell into strength at every opportunity,' said a dealer. 'There is plenty of uncertainty about exactly how the government action will unfreeze credit markets, when this will happen and the impact of the coming recession.'

Leading the index losers were SingTel (probably because of Australian-dollar concerns), Keppel Corp (possibly because of worries over a slowing marine and offshore sector), and the banks.

SingTel's 19-cent plunge to $2.71 cut almost 20 points off the STI, while losses in the banks combined to account for a further 22 points. Sharp declines in commodity plays Wilmar and Olam sliced seven points off.

China shipyard Cosco Corp was in the spotlight for a second straight day, its 20.5 cent or 20.5 per cent collapse to 79.5 cents on volume of 86.3 million shares making it the second most actively traded counter.Tuesday's sell-off came after Credit Suisse rated the stock at 55 cents fair value.

Yesterday, DMG & Partners joined in with another 'sell' call along with an 86-cent target. Among other things, DMG said drastic changes to the macro-economic environment over the past two weeks have ended the multi-year boom cycle abruptly.

'The market for capital-intensive bulk carriers, already under close scrutiny from influx of new supply entering in 2009 and falling freight rates (a decline of 67 per cent from Sept 8), is now challenged with virtually no order delivery, delivery delays and cancellation possibilities,' DMG said.

RBS Greenwich Capital said: 'Some readers have asked why the money markets have not shown a greater improvement already. Traders suggest there are at least three reasons why the improvement is so restrained:

1) because the money market community is still unsure about how various government loan guarantees work and who exactly is covered;

2) because some money market funds have faced redemptions and are preserving cash; and

3) others are skittish having been caught out by the illiquidity of certain paper in the past and are likely to be even more discerning going forward.

'Nonetheless, there is some hope that once the government guarantees become better understood, spreads will start to tighten sharply, even allowing for the factors above.'

-Editorial Report by R SIVANITHY (16 Oct)

Cosco S'pore responds to SGX queries on price fall

by WONG WEI KONG (16 Oct)

It says no official notification of Cosco Dalian's client filing for bankruptcy

COSCO Corp Singapore finally broke its silence yesterday on several issues which had driven down its share price, after it was prompted by several queries from the Singapore Exchange (SGX) to issue a statement.

News of Cosco's Norwegian client MPF Corp filing for bankruptcy recently had spooked the market, and fanned worries that the credit crisis could squeeze demand for new shipbuilding and lead to order cancellations. Cosco shares lost around 37 per cent over two days to close at 79.5 cents yesterday.

In its statement after the close of trading, Cosco said that it was brought to its attention that MPF, the buyer of a floating, production, drilling, storage and off-loading (FPDSO) unit being built by subsidiary Cosco Dalian, had sought bankruptcy protection. However, it has not received any official notification of the bankruptcy protection sought by MPF.

The value of the MPF contract is about US$119 million. MPF has made payments for the first three instalments amounting to US$98 million. The fourth (and final) payment of some US$21 million is due to be paid upon delivery of the vessel, scheduled for Dec 15.

'To date, Cosco Dalian has not received any indication from MPF that it is not willing or not able to make payment of the last instalment, and Cosco Dalian continues to perform its obligations under the building contract,' Cosco said.

Under the building contract, Cosco Dalian also has the right to sell the vessel if the payment of any instalment is not made by MPF. Based on current market prices, proceeds from the sale of the vessel would be more than sufficient to cover the sum of the outstanding instalment, Cosco added.

Giving an update on its dry bulk carrier delivery schedule, Cosco said that its subsidiary, Cosco Shipyard (Zhoushan) Co Ltd, had contracted with certain subsidiaries of the wider Cosco group for the construction and delivery of the first 10 units of 57,000 dwt dry bulk carriers.

An understanding has been reached with the counterparties that the first of these vessels will be delivered by Dec 31. The remaining nine vessels will be delivered progressively.

'To date, all the other remaining vessel building contracts being undertaken by the company's subsidiaries at Dalian and Guangdong are proceeding according to original schedule,' it said.

Other than a previously announced cancellation in April 2008, there has been no other cancellations of orders, Cosco said. 'The company is not aware of any solvency issues relating to its suppliers and/or customers.'

No profit warning is required and 23 per cent of the company's shipbuilding contracts are with companies within the wider Cosco group, it added.

-Research Report by WONG WEI KONG (16 Oct)

When silence was not golden

by WONG WEI KONG (16 Oct)

COSCO Corp Singapore truly became a penny stock yesterday, with another tumble in its share price in what was an acute crisis of confidence.

The stock fell 20.5 per cent or 20.5 cents to 79.5 cents yesterday - this coming after it crashed almost 17 per cent on Tuesday.

That slide will likely be checked, now that Cosco has come out to address some of the concerns the market had over the company.

But the question remains why the company waited so long to clear the air, and did so only after it was queried by the Singapore Exchange.

Tuesday's fall was attributed to a downgrade in Cosco's target price by Credit Suisse to 55 cents from $1.20, with an 'underperform' rating. Credit Suisse said in a report that it expects Cosco shares to drift lower on concerns over shipbuilding demand, risk of order cancellations and delivery delays.

The view that the current credit condition could squeeze demand for new shipbuilding and lead to order cancellations by clients hit by tighter credit lines is one that was widely held, especially after news of Cosco's Norwegian client MPF filing for bankruptcy.

Cosco declined, however, to address these issues when presented with the chance on Tuesday, when the media asked the company to comment on the market's concerns. It was an opportunity missed, and one with costly consequences for its shareholders. Not surprisingly, given the lack of any assurances from the company, the stock continued its slide yesterday on heavy volumes, as more joined in the downgrades.

Why was it so difficult for Cosco to provide timely assurances to the market? Other companies had provided updates and assurances on their businesses when there was a need to. When the tainted milk scandal broke out in China, Chinese food-related companies here issued statements to tell investors what the impact, if any, was on their operations. Similarly, when the Sichuan earthquake took place, listed companies with operations in the region all issued statements to update shareholders. So too when hurricanes struck the US.

In sharp contrast, FSL Trust Management Pte Ltd, the trustee-manager of First Ship Lease Trust (FSL Trust), took the initiative to assure investors after its units also fell in heavy trade. It said yesterday that FSL Trust continues to receive steady lease rental payments from its eight lessees, has a robust set of risk management protocols and is in regular dialogue with its lessees with regard to their credit-worthiness, and reaffirmed its earlier distribution per unit guidance.

Cosco's reticence is all the more surprising given that the lack of communication from the company was cited as a key factor for the market's loss in confidence. Said Credit Suisse in its report: 'Inadequate disclosure on dry bulk newbuild schedule and no announcements on successful delivery of dry bulk vessel to customer to-date (against 10 planned deliveries in 2008 and 41 vessels in 2009) heighten our concerns on execution risk.'

There was clearly an information gap regarding Cosco. As one investor noted in an email to BT, CIMB also made a call on Cosco on Tuesday, the same day Credit Suisse issued its downgrade. But the two calls were poles apart. In opposition to Credit Suisse, CIMB said: 'Key catalysts for Cosco include better-than-expected offshore and conversion orders coupled with falling steel prices. We maintain a 'buy' call with a target price of $2.89.'

The sharply contrasting calls indicated that Cosco had given little guidance to the market, leaving analysts to make their best or worst assumptions. The company's silence simply fanned speculation that bad news may lie just around the corner.

Cosco's statement last night may arrest the fall in its share price. But it may have come too late. Two days of fear-driven selling have destroyed a huge chunk of shareholder value, and more importantly, shattered trust in the company.

Rebuilding credibility may prove a major challenge for Cosco.

-Research Report by WONG WEI KONG (16 Oct)

Semb Marine 151008

What a roller-coaster ride it has been for Sembcorp Marine ! From a low of 1.95 on 10 oct, to a high of 2.73, and now closing at 2.04 today, all in a matter of 4 days !

We could see Sembcorp Marine trading between the downtrend channel (red) for the next few days. The 2.00 support should be quite resilient as the 2 long term downtrend supports(low pink, low red) meets around there.

However, if the support breaks, we could see it hitting the 18 apr 2005 low of 1.85.



For tomorrow :

Support @ 2.02 (low red), 2.00 (low pink), 1.92 (low black), 1.85
Resistance @ 2.22 (mid black), 2.24 (mid red), 2.35, 2.40

Cosco 151008

Cosco today opened below the long term downtrend resistance (upp pink ...), almost testing the downtrend support (low red). Cosco managed to swing from a high of 1.30 yesterday, to a low of 0.760 today, a difference of 0.54 !

Recovery of price above the 1.00 seems highly unlikely now. We could see Cosco continue to trade within the downtrend channel (upp pink ...) and may eventually hit the 0.500 level.



For tomorrow :

Support @ 0.660 (low red), 0.555 (low pink ...)
Resistance @ 0.940 (upp pink ...), 1.04 (mid red), 1.28 (low pink)

Cosco shares sink on analyst downgrade

by LYNETTE KHOO (15 Oct)

Higher risk of order cancellations, slower shipbuilding demand

(SINGAPORE) The sell- down in shares of Cosco Corp on credit concerns has left one of the last two non-penny S-shares on the brink of going under the one dollar mark.

Some dealers attributed the fall to a downgrade in target price by Credit Suisse to 55 cents from $1.20, with an 'underperform' rating.

Yesterday, Cosco shares held up above $1.20 in the morning trading session before plummeting in the afternoon session to close at a two-year low of $1, which was a 16.7 per cent slump from Monday. It was the second most actively traded stock with 78.42 million shares changing hands.

Credit Suisse analyst Haider Ali said in a report published yesterday that he expects Cosco shares to drift lower towards its estimated trough value of 55 cents on concerns over shipbuilding demand, risk of order cancellations and delivery delays.

'New contracts wins for Cosco Corp have already slowed dramatically; now the question is if they can deliver as per original plan,' Mr Ali said. 'Inadequate disclosure on dry bulk newbuild schedule and no announcements on successful delivery of dry bulk vessel to customer to-date (against 10 planned deliveries in 2008 and 41 vessels in 2009) heighten our concerns on execution risk.'

Analysts pointed out that the current credit condition could squeeze demand for new shipbuilding and raise the risk of order cancellations by clients that are held back by tighter credit lines.

'People are wary of shipbuilding companies in general, given the credit crunch,' said Macquarie Securities analyst Ashwin Sanketh.

'Financing shipbuilding is going to be a challenge now,' he added. 'All yards are seeing some order cancellation, whether it is Korean or Chinese. From that point of view, Cosco is no different from the other shipbuilding yards.'

Recent news of Cosco's Norwegian client MPF filing for bankruptcy also stoked more fears among investors who were already concerned about weak orderbook growth and rising competition, analysts said.

Any pull-out of contract would leave Cosco with only 10-30 per cent of the value of the contract that was received as deposit, Mr Sanketh estimated.

Cosco declined to comment on these concerns yesterday.

-Research Report by LYNETTE KHOO (15 Oct)

SGX Research Report

by Citi Investment Research (10 Oct)

Q1FY09 preview: Volatility has kept volumes ahead of forecast in Q1FY09 (September 2008 quarter), and hence the SGX could turn in a flat q-o-q profit of $91 million (Q4FY08: $91 million).

However a sharp fall in the Straits Times Index (STI), changes affecting CNX Nifty futures, and lower structured warrants suggest a weaker revenue outlook. STI's Oct 10 close at 1,948 suggests $920 million per day (our base-case forecast) at a 55 per cent velocity; that velocity may weaken if the STI falls further.

We maintain our FY09 profit forecast of $246 million pending the Q1 results announcement on Oct 15.

Bloomberg consensus expects FY09 net profit of $355 million, and EPS of $0.33. Citi's estimate is at 69 per cent of consensus, and remains at the bottom of the range.

-Research Report by Citi Investment Research (10 Oct)

How to price in a recession if Wall St is still playing catch-up?

by R SIVANITHY (13 Oct)

HOW does one go about pricing in a recession? Or to be more specific, how should one price in an impending slowdown whose magnitude is completely unknown as the source is a global crisis that has shot confidence in stocks worldwide to bits?

And to top it off, how does one anticipate where stocks might head when Wall Street clearly is in its death throes but may not have bottomed yet?

One good starting point might be to look at the two recessions of the past 10 years and ask oneself, are present conditions better, the same, or worse than those two occasions?

The most recent was in 2003 during the Sars epidemic and the US invasion of Iraq, at which time the Straits Times Index sank to 1,200.

The previous episode was in 1998 during the regional crisis when, almost exactly 10 years ago, the STI bottomed at 800 amidst panic-selling of the baht, rupiah, ringgit and the local dollar.

Adding to the market's problems at that time was a full-scale blowout involving Malaysian shares traded on Clob International when the Malaysian government declared Clob an illegal market and ordered the migration of all shares back to Malaysia.

If you accept that conditions are at least as bad as during Sars, then the STI dropping to the 1,200 region is possible which, if it occurs, represents 38 per cent further downside from Friday's 1,948 closing.

The alternative, which is if you believe that carnage in the world's banking system and a loss of faith in governments to prop markets up is worse than a loss of confidence in South-east Asian currencies, means that the index might even lose the 1,000 level.

Readers are best left to their own devices to decide which of these two admittedly extreme - but yet plausible - scenarios they prefer or even if they think that both are too outrageous to consider. A few pointers however, are in order.

First, charts and fundamentals are of virtually no use in times like these. Chartists last week believed firmly that the STI wouldn't break below the 2,000 mark or that the Dow Jones Industrial Average would be able to hold on to 9,000. Both those targets have now been consigned to the scrap heap.

Similarly, fundamental gauges like price/earnings and price/book offer little insight when only the numerator is visible and the denominator is a blind estimate that might have been based on spurious estimates in the first place.

Second, everyone has underestimated the magnitude of the risks involved. Just three weeks ago for example, analysts were calling a strong buy on China stock Ferrochina with target prices above $2 when the stock was at 64 cents.

No one it seems, realised that heavily-geared companies like Ferrochina might find it difficult to cope with the credit crunch and as a result, might face financial ruin. Ferrochina's admission of its problems will surely lead to worries about how many other companies there are whose future is similarly threatened.

Third, and most important, Wall Street. As pointed out previously, the meltdown there is simply because US stocks are now playing catch-up with the rest of the world, having been artificially supported by implicit and explicit promises from officialdom that if necessary, a government bailout would be at hand.

This point has been repeatedly made throughout the past year in this column, and it is the abrupt removal now of this 'bailout premium' that is sending the US market crashing. The removal of this premium of course, comes because of a sudden, awful realisation that the size of the bailout needed is simply too big, certainly much more than the US$700 billion the US Treasury announced three weeks ago.

As stated on Saturday, a possible bottom for the US market might be a 50 per cent retracement from its all-time high, which would take the Dow Jones Industrial Average to about 7,100 versus Friday's close of 8,450.

We wouldn't however, put too much money into that prediction though.

To borrow an infamous phrase coined by the Bush administrations, the existence of too many 'unknown unknowns' suggests that a lengthy recession (latest estimates are about two years) has not been properly priced in yet. In which case the advice remains the same as it's been for months now - sell into strength at every opportunity because there won't be many of them.

-Editorial Report by R SIVANITHY (13 Oct)

Olam 101008

After breaking the long term downtrend support (upp pink) on 6 oct, Olam seems to have built up some support around the 1.40 level (blue --), as indicated by the volume distribution bar.

Olam broke out of the downtrend channel on 9 oct, but quickly slipped back into the downtrend the next day. Trading has been volatile these few days, as evident by the long bars.

If Olam manages to stay above the 1.40 level, we could see it test the downtrend channel (upp grey, upp pink) this week.

However, if Olam breaks the 1.40 level, we could see it re-visiting the 1.30 level, and even test the downtrend support (low red).



For monday :

Support @ 1.40 (blue --), 1.33 (low grey), 1.20 (low red), 1.17 (low pink)
Resistance @ 1.47 (mid red), 1.55 (upp pink), 1.61 (upp grey)

Indofood Agri 101008

After our discussion on 7 oct, Indofood Agri continues to trade within the downtrend channel (pink). More importantly, Indofood Agri has now broken the long term downtrend resistance (upp red). Also discussed, Indofood Agri hitting 0.500 looks more and more certain.

The 0.500 level is also where the downtrend resistance (upp pink) meets the long term downtrend support (low red). If Indofood Agri manages to stay above this support (low red), we may see some rebound when it hits the 0.500 level.



For monday :

Support @ 0.513 (low red), 0.460 (mid pink), 0.350 (low pink)
Resistance @ 0.610 (upp red), 0.620 (upp pink), 0.685 (green --)

STI below 2,000 on Wall St coat-tails

by R SIVANITHY (11 Oct)

US market was just waiting to tank, so investors should not be surprised


EXACTLY one year ago to the day on Oct 11, 2007, the Straits Times Index (STI) closed at an all-time high of 3,831, but those heady days are now long-forgotten. After an unforgettable week during which it suffered mind-numbing selling pressure, the STI yesterday crashed through the 2,000 level.

It now stands at 1,948.33, a staggering loss of 349 points or 15 per cent in one week that has taken it to its lowest level in four years. For the year the STI is down 44 per cent, while its loss from its all-time high is 49 per cent.

There seems to be a general sense of bewilderment at the source of this selling, namely Wall Street's crash over the past three weeks despite announcement of a US$700 billion bank bailout plan, a generous emergency interest rate cut, repeated liquidity injections by the Federal Reserve, and the latest announcement that the government will buy into troubled banks along the lines of the UK government's Wednesday pledge.

Europe's meltdown too may have been puzzling to some observers, though the selling there can correctly be attributed to contagion pressure emanating from Wall Street.

Truth is, although the speed with which US stocks have capitulated may be of some surprise, the only real eyebrow-raiser should be that it took this long for investors to latch on to the fact that the US market was hugely overvalued all along and this was - not to put too fine a point on it - an accident waiting to happen. And now that they have, all Wall Street is doing is playing catch-up with the rest of the world, and that until the US market caught up with everywhere else, there could be no bottom for stocks.

Valuations played a big role in our assessment since the earnings growth being priced in at all the various levels in question was, in our view, recklessly optimistic given the enormity of the crisis confronting the US.

A major source of this irrational optimism was explicit and implicit promises by American officialdom that if need be, the stock market would be bailed out at any cost. It was these promises that kept Wall Street afloat and US stock prices from finding their true, intrinsic values.

By the same token, it is the sudden, awful realisation now that the size of the actual bailout required may simply too large to comprehend because officialdom waited too long, that has led to the accelerated selloff of the past three weeks.

Pundits keen on apportioning blame might say this ill-advised complacency in the equity market started with former Fed chief Alan Greenspan who slashed interest rates seven years ago and arguably lit the fire that inflated the housing balloon, a legacy that was continued by incumbent Fed boss Ben Bernanke whose nickname 'Helicopter Ben' was coined after he vowed to fling money out of helicopters if the economy ever needed saving.

Finger-pointing aside, what we are now witnessing is a rapid repricing of the US market, compressing into a few weeks the pain that the rest of the world took many months to suffer. The problem, of course, is that as Wall Street bleeds, so does everyone else.

Since the announcement of the US Treasury bailout plan three weeks ago, the Dow Jones Industrial Average has crashed 2,809 points or 25 per cent to 8,579, while the S&P 500's loss has been 28 per cent at 909. London's FTSE index, in the meantime, lost about 25 per cent despite the authorities banning short-selling (another ill-conceived move), while Hong Kong's Hang Seng has shed 23 per cent.

If Wall Street were to fully catch up with the markets that it has caused to crash, where might it bottom? Since the average loss around the globe so far has been in the region of 50 per cent from all-time high, then it's entirely reasonable to expect Wall Street to follow suit. If so, this would take the Dow to about 7,100 and the S&P 500 to 788 - roughly another 15 or 16 per cent to the downside from Thursday's close.

The American market's catch-up woes have seriously undermined the European governments' moves to shore up confidence and stocks on the European continent are now in sympathetic free-fall. As for the hastily-convened US Treasury bailout, it has faded into a distant memory as investors stampede for the exits.

It's contagion at its worst - thanks in no small part to years of misplaced optimism on Wall Street that has quickly reversed into rampant pessimism. Investors will simply have to sit and wait until the catch-up process runs its course before any stability emerges.

-Editorial Report by R SIVANITHY (11 Oct)

Cosco 101008

Cosco's double-bottom failed to materialise. Instead, it broke the downtrend support (low pink) on 9 oct, and also gapped down today, testing the long term downtrend support (pink ...).

Cosco is almost back to where it started to rise back in the beginning of 2006.



For monday :

Support @ 1.00 (pink ...), 0.960 (low red)
Resistance @ 1.132 (mid red), 1.34 (ow pink), 1.50 (green --)

China Hongx 101008

China Hongxing closed right on the downtrend support (low grey) today. After our discussion on 7 oct, China Hongxing broke the 0.245 support (pink --) the next day.

We should see Ching Hongxing trading sideways for the time being, with the upside capped by the downtrend resistance (mid grey).

If China Hongx breaks the 0.200 support again, we could see it testing the 20 feb 2006 low of 0.162.



For monday :

Support @ 0.190, 0.185 (low grey), 0.162
Resistance @ 0.200, 0.220, 0.231 (mid grey)

Ferro china fails to pay loans

Ferrochina fails to pay loans

9 oct 1636 HRS (+8 GMT)

SINGAPORE - Singapore-listed FerroChina said on Thursday it was unable to repay some of its working capital loans worth about 706 million yuan (US$104 million).

The steelmaker also said it has 2.03 billon yuan worth of loan facilities and notes that may become due and payable.

'The company is currently in active negotiations with its financial lenders,' the statement said.

'There is however no assurance that such negotiations or discussions will be successful, in which event, the group will not have sufficient cash to satisfy its financial obligations,' the firm said.

The firm has temporarily stopped its manufacturing operations in Jiangsu, China.

Shares in FerroChina will remain suspended until further notice, the firm added. -- REUTERS

Making sense of the post-bailout meltdown

by VIKRAM KHANNA (8 Oct)

US needs to urgently recapitalise its banks and Europe must get its act together fast

THE global stockmarket meltdown in recent days and the still-frozen state of the interbank markets are clear signs that market participants have given a thumbs-down to the way the authorities in the United States and Europe are dealing with the worst financial crisis in 80 years.

The US$700 billion bailout package hastily put together by the US Treasury and the Federal Reserve has been far from effective in soothing market panic. While the case can be made that an imperfect package is better than none, after the package was passed by the US Congress and signed by President George W Bush, the market started focusing on its imperfections.

Unfortunately, these are considerable. Much of the money is intended to be used by the US Treasury to buy, in stages, the toxic assets off the books of US financial institutions. It is hoped that once they get rid of their junk, the institutions will resume lending as well as rebuilding their capital.

However, there are big holes in this story. One problem is the price which the Treasury will pay for the junk. If it's the current market price (which is very low, if not zero), the banks would end up getting little help - and in fact would probably not even accept the deal (which is what happened in Japan in the 1990s; banks simply refused to step forward and admit how much junk they were carrying).

On the other hand, if it's an artificially inflated price - which would require a suspension of mark-to-market accounting norms - there would be an uproar among taxpayers about overpaying Wall Street at the expense of Joe Sixpack.

The other problem is that the bailout plan does not directly address the issue of recapitalising the banks. While this might indirectly happen over time if banks were able to get the bad assets off their books and rebuild from there, the pricing problem mentioned above (plus the likely slow pace of recapitalisation) inspires little confidence.

Thus, many economists propose that another bailout plan is needed - which focuses on recapitalisation. This could be done via a direct injection of public funds into the banks, in return for preferred shares, with matching contributions by existing shareholders (to minimise costs to taxpayers).

But however it is done, bank recapitalisation is of critical importance; a recent IMF study of 42 systemic banking crises showed that the vast majority of cases involved the government intervening to recapitalise financial institutions.

Meanwhile, to prevent bank runs, the US Federal Reserve needs to announce that it will stand behind any financial institution that experiences a run. Deposit insurance needs to be expanded as well. The markets are still waiting for all of this to happen.

But while the US is doing its best to deal with a systemic problem in a systemic manner - even if imperfectly - Europe is not even trying. The European Central Bank has a mandate to act on interest rates (and, bizarrely, raised interest rates early this year) but has no Europe-wide regulatory mandate. This is left to regulators in individual countries. And, so far, they have acted in total disregard of the consequences of their actions on other countries.

Ireland, for example, recently announced that it would guarantee all deposits in Irish banks. So money fled from all corners of Europe to Ireland. That forced other countries - starting with Germany and Denmark - to announce full deposit insurance as well.

Germany, meanwhile, has so far refused to endorse a pan-European response to the crisis, even as it is obvious that the balance sheets of European banks are closely interconnected. And if Germany says no, no Europe-wide initiative is possible.

Eventually, a coordinated response will happen - because markets are unlikely to stabilise until it does. What we are seeing then is financial devastation caused by bad banking practices - and aggravated by inadequate policy responses.

-Editorial Report by VIKRAM KHANNA (8 Oct)

Indofood Agri 071008

The rebound for Indofood Agri was short-lived as it has now not only slipped below the uptrend support (low blue), Indofood Agri has also broken the 0.685 support (green --).

Indofood Agri also opened slightly below the long term downtrend support (low red), tested the 0.685 neckline (green --), before closing right on the downtrend support again.

We could see Indofood Agri trading between the 0.685 neckline and long term downtrend support (low red). The danger of Indofood Agri slipping below the long term downtrend support (low red) has also increased.

If that support breaks, we could see Indofood Agri hitting the 0.500 level.



For tomorrow :

Support @ 0.618 (low red), 0.550 (mid pink), 0.433 (low pink)
Resistance @ 0.685 (green --), 0.705 (low blue, upp pink), 0.770 (green ...), 0.800(blue --)

China Hongx 071008

There wasn't any recovery for China Hongxing, instead, it continued on its downtrend, breaking the 0.270 support (red...). China Hongxing is now trading very near to the 0.245 support (pink --).

AS you can see from the chart, the downtrend support (mid grey) meets the 0.245 support tomorrow, which means that tomorrow could be a crucial day for China Hongxing.

If the 0.245 support breaks, we could see China Hongxing retreating back towards the 0.200 level (low grey), which was last seen in jun 2006.



For tomorrow :

Support @ 0.245 (mid grey, pink --), 0.200 (low grey)
Resistance @ 0.270 (red ...), 0.283 (upp grey), 0.285 (green --), 0.302 (grey ...), 0.315 (red --)

Will 2,300 hold again if everyone is selling into strength?

by R SIVANITHY (22 Sept)

They say that markets are always trying to tell you something. Not necessarily the truth, but something. So what does recent behaviour tell us?

Probably the most important message to be gleaned from the plunges on Wall Street and the rest of the world during the week is that the big money (whatever there is left of it) is much more inclined to 'buy in anticipation and sell on news' than place any lasting faith in rallies.

Another way of looking at it is that 'selling into strength' is the preferred strategy and clearly, any signs of strength only serve to offer mutual funds, already facing massive redemptions, the chance to bail out at slightly better prices.

Speaking of bailing out, the 'buy in anticipation..' play should have been obvious during the week from the way prices shot up before the US Senate vote on Treasury Secretary's Henry Paulson's bailout plan or Bank Asset Rescue Fund (BARF), only to plunge later on Thursday just seconds after the positive vote, and again on Friday before and after the full Congressional approval.

This in turn suggests a loss of confidence in US officialdom, at least for now, to be able to deliver anything substantial in the way of economic or financial improvements in the coming months - even with BARF in place.

Legendary investor Warren Buffet probably summed it right when he was quoted by Bloomberg on Friday saying 'it would have been a total disaster had it not been passed', the corollary of course being that as of now, it is only a partial disaster.

How much of a partial disaster it will be remains to be seen, though suggestions from some quarters that US$700b is only a drop in the bucket containing several trillion dollars worth of worthless credit instruments probably won't do much to encourage confidence.

Neither will the latest US jobs figures, which combined with recent economic data and a still-plunging housing market portray an economy toppling over the recessionary precipice without much of a safety net below.

In a report a week ago, BCA Research looked at the latest US manufacturing figures and said 'the US manufacturing ISM survey plunged today, signalling that the feedback loop from the financial system to the economy is now biting'.

'The crunch in the banking system has been steadily working its way into the economy this year. However, the floor gave way in September, according to the ISM manufacturing survey (other global purchasing managers' surveys showed a similar sharp drop, underscoring that a global slump is underway)'.

And, in its Friday Insights, BCA said of the latest jobs data 'more layoffs loom as financial sector woes have now shut off the credit taps to the broader corporate sector, ie the employment downturn is no longer contained to housing and financial areas. Consumer sentiment is depressed: the Conference Board survey confirmed that job security has been shattered'.

'The cutbacks in hiring plans will not be quickly reversed even if government passes the bailout package later (Friday). At best, it will prevent the US from sliding into a full-blown debt deflation, but it is too late to avoid at least a significant recession'.

As for the local market, the dreaded 'R' word has now also begun making its rounds, so the outlook isn't great. The Straits Times Index's 2,300 level had twice proven resilient over the past fortnight but its cracking on Friday opens the door for further downside - DMG & Partners' chart view is around 2,100 while Citi Investment Research also picked that region for a possible bottom.

Much of course, will depend on daily movements in the Hang Seng Index, which are sometimes - not always - influenced by shifts in the US futures market. Europe's opening in the late afternoon also plays a role. However, as always, expectations of how Wall St might move later in each day will dictate the STI's direction.

As of now though, the advice given here for the past umpteen weeks remains the same - take every opportunity to sell into strength, because clearly, that's what the big money is doing.

-Editorial Report by R SIVANITHY (22 Sept)

Semb Marine 031008

Sembcorp Marine opened below the 2 downtrend supports (low red, mid pink) today. It also came close to testing the big volume support (2.66 on 30 sep), before closing above the downtrend support (low black).

We could see Sembcorp Marine continue to trade within the downtrend channel, or at best, sideways, and hitting the 2.64 level (low pink meets low black) before there is a rebound.



For monday :

Support @ 2.68 (low black), 2.66, 2.65 (low pink)
Resistance @ 2.86 (low red), 2.91 (mid pink), 2.94 (mid black), 2.99 (red --), 3.10 (upp black)

Olam 031008

Olam today hit yet another lower bottom, testing the long term downtrend support (low pink) and almost tested the downtrend support (low red).

As mentioned on 30 sep, things won't look too well for Olam if it keeps forming lower bottoms. We may continue to see Olam trading within the downtrend channels (red, pink) for awhile.



For monday :

Support @ 1.565 (low pink), 1.535 (low red)
Resistance @ 1.715 (mid red), 1.73 (upp pink), 1.80 (pink ...), 1.88 (pink --)

China Hongx 031008

China Hongxing formed a Gravestone Doji today. The last time China Hongxing formed 1 was back on 28 aug. During that time, China Hongxing was trading sideways, after going on a downtrend the weeks before.

The next few days saw China Hongxing recovering but after hitting the 0.405 resistance (lightblue --), it weakened considerably and China Hongxing eventually hit the 0.245 support (pink --).

Looking at the chart, even if there's a rebound for China Hongxing, I feel the upside would be limited to the 0.315 resistance (red --).



For monday :

Support @ 0.285 (green --), 0.270 (red ...), 0.255 (mid grey), 0.245 (pink --)
Resistance @ 0.293 (upp grey), 0.312 (grey ...), 0.315 (red --), 0.335 (blue --)

Semb Marine 300908

Nobody could have, or even expected Sembcorp Marine to hit a low of 2.33 today. The last time Sembcorp Marine even went below the 2.50 level was almost 3 years ago, back in nov 2005.

Sembcorp Marine opened even below the long term downtrend support (low pink), hitting a low of 2.33 briefly, before recovering more than 70cents, and then closing on the 2.99 support (red --). What a dramatic day for Sembcorp Marine !

Where does Sembcorp Marine go from here? For sure, we won't be seeing Sembcorp Marine hitting such lows again.

If Sembcorp Marine manages to stay above the downtrend supports, we could see it trading sideways, with the upside capped by the 3.15 resistance (blue --).



For thursday :

Support @ 2.99 (red --), 2.92 (low pink), 2.88 (low red), 2.66
Resistance @ 2.99 (red --), 3.15 (blue --), 3.184 (mid red), 3.206 (mid pink), 3.41 (green ...)

Olam 300908

Since our last discussion on 22 sep where Gravestone Doji was formed, Olam broke the 1.96 support (blue ...) the next day and continued to weaken before breaking the 1.88 support (pink --) on 25 sep. Olam continues to trade within the downtrend channel.

The last time Olam went below the 1.70 level was back on 20 mar 2008, where it reversed it trend upwards almost as dramatically as its fall then. However, this time, things are a little different.

If you look at the chart, Olam has formed multiple bottoms (4 bottoms) since the end of august, and each bottom was lower than the last.

For Olam to have any chance of a reversal, it would first have to break the 1.88 and 1.96 resistances.



For thursday :

Support @ 1.80 (pink ...), 1.69 (low pink), 1.62 (low red)
Resistance @ 1.836 (mid red), 1.86 (upp pink), 1.88 (pink --), 1.98 (blue ...)

Indofood Agri 300908

After our discussion on 22 sep, Indofood Agri couldn't hold onto its 0.900 support (pink ...), tested the 0.840 support (blue ...), finally breaking the 0.800 support (blue --) on monday and closed on the 0.770 support (green ...).

Indofood Agri even opened below the 0.770 support and right on the downtrend support (mid pink), before recovering to close above the 0.770 support.

I've indicated s short-term uptrend channel (blue). The 0.900 neckline (pink ...) now looks quite strong. It could take awhile before we can see Indofood Agri testing that neckline again, provided it can remain in the uptrend channel.



For thursday :

Support @ 0.780 (upp blue), 0.770 (green ...), 0.685 (green --), 0.670 (low blue, mid pink), 0.555 (low red), 0.550 (low pink)

Resistance @ 0.800 (blue --), 0.815 (upp pink), 0.840 (blue ...), 0.866 (mid red), 0.900 (pink ...)

Ferro China 300908

Ever since breaking the 0.660 support (pink ...) after our discussion on 12 sep, Ferro China didn't quite manage to break it after trading sideways last week. Ferrochina even opened below the 0.570 support (red --) today, before closing close to the downtrend resistance (upp red).

Has Ferro China formed a double-bottom?

If you recall, FerroChina's chart looks similar to those of China Hongxing's and Cosco's. The 0.660 neckline (pink ...) now looks to be quite a strong resistance, with the uptrend resistance (mid blue) and downtrend resistance (mid pink) also meeting at the 0.660 level towards the end of the week.

However, if Ferro China manages to break the 0.660 neckline, judging from the volume distribution bars, there won't be much of an obstacle after that. However, given the recent market sentiments, I won't be surprised if FerroChina forms multiple bottoms.



For thursday :

Support @ 0.608 (upp red), 0.570 (red --), 0.530 (mid red), 0.510 (low blue), 0.485 (low red), 0.455 (low pink)

Resistance @ 0.650 (mid blue), 0.660 (pink ...), 0.672 (mid blue), 0.705 (upp blue), 0.730 (grey)

China Milk says raw milk samples safe

by LYNETTE KHOO (30 Sept)

China Milk said its raw milk samples were tested and confirmed by a government laboratory in Daqing to be free from any trace of melamine.

The group had sent its raw milk samples on Sept 26 to Daqing Bureau of Products Quality Supervision and Inspection a government laboratory accredited by the Heilongjiang Bureau of Quality and Technical Supervision.

The raw milk samples were also confirmed by the independent laboratory as compliant with the standards laid down by the national standards for the qualifications of raw and fresh milk, GB6914-1986.

-Editorial Report by LYNETTE KHOO (30 Sept)