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)