Monday 15 September 2008

S-chips are 2008’s worst performers

But survey of FTSE ST indexes shows other stocks are not much better off
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S-chips are 2008’s worst performers

But survey of FTSE ST indexes shows other stocks are not much better off

By Yang Huiwen
15 September 2008

CHINA plays are currently the worst performing stocks on the Singapore Exchange, going by a survey of the family of FTSE ST stock indexes that measure the performance of various sectors of the local market.

But the rest of the market is not much better off, with a sea of red indicating how badly the overall market has done since the start of the year.

The best performer in the series is the FTSE ST Telecommunications Index, which is down almost 15 per cent.

The benchmark Straits Times Index, which is made up of the market’s largest 30 stocks by market capitalisation, is also among the better performers - down about 25 per cent.

In fact, larger cap companies weathered the sell-down better than their smaller counterparts.

The FTSE ST Mid Cap Index has fallen 36.6 per cent since the start of the year, while the FTSE ST Small Cap Index fell 45 per cent.

But the worst numbers still belong to Singapore-listed China companies, also known as ‘S-chips’, which have mimicked a 58 per cent drop in China’s main benchmark, the Shanghai Composite Index.

The result of this is that some China stocks are now trading at depressingly low single-digit price-to-earnings (PE) ratios, according to financial portal Shareinvestor.com. The lower the PE ratio, the cheaper the stocks are relative to their earnings.

Pacific Andes, for example, has one of the lowest PEs of just 2.4 times, while China Aviation Oil is trading at a PE of 2.6 times, and China Sky Chemical Fibre at 3.84 times.

In fact, about one-third of the total 196 China stocks listed here are trading at rock bottom PEs of below five times.

Moving on to other sector indexes, the figures show that oil and gas stocks have lost much of their shine, as investors worry that growth may be affected by a further weakening in demand for oil amid slowing global growth.

The FTSE ST Oil & Gas Index is down 48.96 per cent this year. Crude oil is down more than 30 per cent since tipping over US$145 in July, and is up only about 5per cent since January.

The FTSE ST Real Estate Index which has 43 constituents, including heavyweights Hong Kong Land, CapitaLand and Keppel Land, is down 34 per cent as delayed launches and falling property prices plague the performance outlook for property firms.

But the telecoms sector has proved its defensive characteristics and has been better supported than real estate and financials.

The FTSE ST Telecommunications Index, which includes SingTel, M1 and StarHub, has lost a relatively modest 14.6 per cent to date, outperforming the main benchmark Straits Times Index.

Despite the doom and gloom in the local equities market, DBS Research said it has an ‘overweight’ rating on Singapore equities overall as the ‘risk profile over a 12-month horizon is attractive’, given that current valuation levels are close to crisis-period levels. It added that it expects the market to rebound the fastest when things turn north.

The FTSE ST family of stock indexes were launched in January this year to better help investors track the performance of the Singapore market.

Stocks must meet certain criteria to be included.

For instance, there are minimum requirements for trading liquidity and a certain proportion of a counter’s shares should be available for general investor trading.