In response to the report of Alcoa on its encouraging earnings in the third quarter after the closing of the US market on Wednesday, traders decided to bet on Thursday on Wall Street rising by pushing the prices of stock upward.
The basis of this analysis was on the strong performance of the US futures market wherein the futures on the Dow Jones Industrial Average in December rose nearly 100 points during the trading hours in Asia, as well as during the opening in Europe, in which early gains recorded an average of 1.2 percent.
Also, the said analysis was based on the sharp reversal in the Hang Seng Index in Hong Kong. During the morning trading, it threatened to plunge into the negative territory, but it eventually closed at 1.18 percent higher throughout the day.
An additional point of 16.32 was added to the 2,650.95 of the Straits Times Index (STI). Turnover, which excludes issues of foreign currency, had a total amount of $1.55 billion worth of 2 billion units worth or around 77 cents for every unit. Exclusive of derivatives, an increase of 239 was recorded versus the fall of 134.
The day cautiously kicked off with the STI drifted weaker on low volume in return to the uncertain close on the financial market overnight. However, sentiment changed when the Dow futures displayed upward momentum. It was added with dealers who pointed out Alcoa’s report of its after-hours earnings as a motivation to buy.
Singapore Exchange (SGX) was one of the components of STI that finished higher at $8.47, which had an additional of five cents. In maintaining its SGX’s ‘sell’, DMG & Partners stated yesterday that the price weakness that was recently recorded in small and mid-cap stocks has negative effect for the average daily turnover (ADT).
DMG said, “Value traded for (smaller cap S-chips) averaged $204 million daily in September, which was higher than the $192 million for July-September. However, we do not expect the strength to persist as the recent weakness in small/mid-cap stocks could lead to reduced trading interest . . . futures trading volume of 13.5 million units in 1Q FY2010 is close to the 13.9 million units in 4Q FY2009. However, this represents a 22 per cent y-o-y decline”.
The firm also said that its sensitive analysis shows that the target price of SGX is probably $8.80 if the ADT for the 2011 fiscal year hits the $2 billion. If the ADT hits the $2.4 billion, it would be $10.
In the latest report of Morgan Stanley (MS) on US Economics entitled ‘Don’t Fear the Double Dip’, it said that even though double-dip anxieties are coming back because of the negative outcome of the ‘second derivative’, the firm is still confident that a moderate yet sustainable expansion will surely come out.
”The slowdown in incoming data is not surprising, but data have been disappointing”, stated MS as it added that the firm has already marked down the second half growth estimate in US from 3 percent to 2.25 percent with the final quarter running at only 2 percent.
However, the firm’s optimistic reasons are four-fold: that the fiscal thrust of the government is creating an impact, its policy support will not exit prematurely, demand globally is improving, and excesses such as inventory and housing imbalances are lessening.