Tuesday, January 25, 2011

STI fails to hold on to 25-point rise

THE Straits Times Index narrowly avoided kicking the week off with a loss yesterday when it finished 1.16 points higher at 3,185.76. But the index's close didn't tell the whole story of a session which started with a 25-point bounce in the index but ended with stocks under pressure, probably ahead of weakness on Wall Street.

A more accurate picture was provided by the advance-decline score and volume - excluding derivatives, there were 157 rises against 230 falls, while excluding foreign-currency issues, only 1.45 billion units worth $1.3 billion were done.

Brokers augmented the sorry statistics with stories of clients who have stopped trading, resulting in poor order flows.

The actives list contained names that would be familiar to most regular observers - Golden Agri, Genting Singapore, and a variety of China stocks. The average unit value of 90 cents per unit highlighted the predominance of penny stocks in the top 20.

Among the actives was Genting Hong Kong, which Macquarie Research Equities (MRE) in a Jan 21 report described as an under-covered yet liquid (daily turnover of US$11 million) stock exposed to the Asian gaming theme and a growing US tourism market.

'We initiate coverage with an 'outperform' rating and US$0.60/ HK$4.70 target price ... At 11.6 times 2011 adjusted EV/Ebitda (enterprise value/earnings before interest, tax, depreciation and amortisation), the stock is trading at a large 25-30 per cent discount to regional gaming stocks,' said MRE. Genting HK yesterday closed unchanged at US$0.47 with more than 20 million shares traded.

Brokers Kim Eng yesterday reported that the Chinese government is expanding property cooling measures to second and third-tier cities in China, as the national property prices have stayed stubbornly high in December.

Kim Eng said: 'Beijing was the first to announce rules to limit property purchases, followed by Shanghai. To date, a total of 16 cities have issued property-cooling regulations. More cities, including Qingdao and Jinan, look set to follow suit ... It appears that the breadth and depth of the measures will soon guarantee that no property developer can run away with the fat profits as in the heydays of the property boom.

'Singapore-listed Chinese residential developers such as Yanlord Land Group, China New Town Development, and Pan Hong Property Group will be negatively affected by the lower speculative demand for housing. On the other hand, Ying Li International Real Estate, being focused on the commercial property development, is on safer ground - for now, at least.'

In its Downunder Daily, Morgan Stanley said it is bullish on developed-market (DM) stocks (UK, US, E  urope and Japan).

'The bull case for DM equities is straightforward: equity valuation is undemanding and earnings growth solid. The DM MSCI index will rise 20-25 per cent if investors price in consensus 2012 earnings on a 'normal' multiple of 14, the average since 2004,' said strategist Gerard Minack, who added that he is not bullish for the year.

'Markets are fast and could price the plausible upside very quickly. More to the point, I do think earning forecasts are too high, and I think cycle risks will become more apparent in the second half. In short, this is a year where we may see the highs for developed equities in the first half, and end up with modest gains on a full-year basis,' he added.

No comments:

Post a Comment