Singapore Exchange’s Straits Times Index (STI) bounced back following improvement at Wall Street.
After dropping 86 points in last week’s sell-off that was allegedly brought about by weakness in the stock market of China, STI rebounded by 67.47 points and closed at 2,612.33 yesterday after Wall Street’s Friday rally. The resurgence at Wall Street was reportedly based on hopes of economic recovery.
Brokers depicted the session as mostly calm with regard to client activity, which implied that the programme trading and short-covering that involved a certain set of stocks caused a substantial amount of the activity. This was much like what had recently transpired in Hong Kong, wherein the Hang Seng Index rebounded by 1.7% after losing 3.3% a week ago.
Property stocks were predominantly firm, although this was more likely caused by a broad-based firming made by all sectors than any particular new development. The Singaporean Government said last week that there will be no modifications to the tax framework that presently govern the property profits. However, brokers dismissed the statement as it may only have minimal or no effect on the affected stocks.
“While we think that there may be some buyers who stayed sidelined in view of the uncertainty and may return to the market in the light of the announcement, we believe that there is just a small proportion of such buyers. As such, we think that this news is unlikely to lead to a sudden surge in buying of properties. We maintain our ‘neutral’ view on the property sector,” OCBC Investment Research said.
In the Singapore Property report for August, financial services provider Morgan Stanley stated that its base case theory for developers is that earlier premiums to book values and net asset values (NAVs) that were seen in 2006 to 2007 are hard to justify today.
Morgan Stanley said, “Back then, all the property sub-segments were in an upcycle due to excess demand over available supply. However, at present, the sole bright spot appears to be the residential segment and the S-developers are not pure residential plays.”
Morgan Stanley also maintained its opinion that the retail, office, hospitality and industrial segments would likely be encountering oversupply for three years more until 2012.
According to the Deutsche Bank, in a “hold” proposal dated August 23, it started off weakly for the company’s first quarter for FY2010 due to a 26% decline in its order book for August 2009.
“The company continues to lag behind its peers in terms of operating performance and profitability. This could be attributed to the higher inventory levels at its distributors, slower store expansion and product discounts/rebates provided to distributors . . . we expect short-term weakness in the share price due to the disappointing August 2009 order book,” Deutsche said.
Market turnover was reportedly 2.87 billion units worth slightly short of $2 billion.