The overnight skid at Wall Street put additional pressure to the local stock market yesterday, but prospects of a potential US recuperation on Thursday somehow helped cut losses.
Hong Kong-based Hang Seng Index fell by nearly 3 percent on the get-go, but managed to recover and finish only 2.5 percent weaker, which led to the Straits Times Index (STI) bringing its loss from almost 28 points down to 18.51 points and closing at 2,667.43 points.
As is usual, stocks priced under ¢20 were the chief recipients of liquidity, although Genting Singapore PLC received top volume. Genting dealt 142 million shares and fell to $1.16 from $1.17.
STI was hauled to a weaker level by the drops incurred by Jardine and Keppel Corporation Limited. SingTel, on the other hand, dropped ¢1 lower and closed at $3.16 with a total of 21 million traded shares, despite Wednesday’s “overweight” from financial services provider Morgan Stanley.
“After the stock’s 26 per cent underperformance year-to-date, we believe it is attractively valued at an estimated FY10 price/earnings of 12.6 and implied FCF (free cash flow) yield of 9-10 per cent, slightly above the regional average,” Morgan Stanley said.
In its Singapore Market Strategy for 23 September 2009, DMG & Partners suggested to investors that they employ a “buy on weakness” stance because it is currently bearish on the market on a short-term basis.
“Having risen to 2,686, the STI’s price/book of 1.65 times is back to the 12-year (we use the period commencing at the Asian financial crisis to cover one full cycle) average of 1.61 times,” DMG & Partners said. It also added that the likelihood that only a modest resurgence will be experienced in the Singaporean economic scene and the fact that the craze right now is on penny stocks may put downward pressure on the stock market. However, DMG & Partners said that STI can achieve a level of 2,880 points on a 12-month term.
“On a 12-month time horizon, the global economy will be much more stable. In addition, interest rates should still remain benign, though marginally higher than current levels,” DMG explained.