The 33.57- point loss yesterday that was experienced by the Straits Times Index (STI) at 2,629.25 was due to the traders who were unsure on how the Wall Street would react regarding the slew of the economic numbers, which is scheduled to be released this coming week; some may not be a positive result as expected.
Aside from GDP, jobless claim numbers, and personal spending, there is also the employment report on Friday, wherein investors suddenly decided that it might turn out bad, or rather bad enough that could pour cold water into the story of the happy recovery that drives the markets upward for over six months now.
Though plausible, the more possible explanation is that these markets are at present experiencing nothing, but the ‘buy in anticipation, sell on news’, which have run up roughly for more than six months with hopes for a recovery; confirmation of these hopes brings an indication to sell.
Another possible explanation is that due to the eagerness of these markets to buy the recovery story, they have overshot themselves and come to a realisation that unless those numbers display a bigger-than-expected improvement, then it may be a great idea to obtain some money from the table.
Whatever the reason, STI’s loss yesterday – which rose around 80 percent in just less than seven months – came together with Hong Kong’s 2.1 percent fall and with China’s 2.65 percent slump. The pressure was added by the soft opening for Europe that occurred in the afternoon. The wide market, which excludes derivatives, only managed 90 rises against 376 falls.
Penny stocks kept on soaking up most of the speculative energies of the market; of the leading 20 counters that were most actively traded, 19 of them received a price of not more than 50 cents, with an exception of Genting Singapore.
Unsurprisingly, with a total unit of 2.6 billion amounting to $1.5 billion that was traded excluding the issues of the foreign currency issues, the average value that was traded for every unit was around 57 cents.
According to brokers, the opportunistic fund-raising that was organised by several companies during the previous few weeks had injected caution to the market. One of these companies was the Genting Singapore, which just made an announcement about rights issue. Yesterday, its nil-paid rights also commenced trading, which closed at 30.5 cents.
Last Friday, BNP Paribas also initiated Genting’s coverage with a ‘buy’. With the use of a ‘mixed-multiple’ approach on valuation, BNP arrived at a target price of $1.35. It said that BNP expects that Genting will turn its profit on the following year.
In another place, Indofood Agri was removed by Goldman Sachs from its Conviction Buy List; however, it retained the company’s ‘buy’ on the stock. According to a report on Friday, Goldman stated that it was trying to maintain its target of $2.20 for 12 months for Indofood by using the estimated earnings of 13 x 2010. “This is in line with the mid-cycle PE (since listing in Feb 2007) and is at a 15 per cent discount to the Singapore market average”, Goldman said. Indofood suffered a drop of 5 cents to $1.64 with only less than 10 million shares that were traded.