Most analysts expect a difficult year ahead with much uncertainty shrouding the economic outlook
By R SIVANITHY 1 January 2009
In yesterday’s report on the penultimate session for the year we pondered the possibility that the Straits Times Index (STI) might be ‘window-undressed’ instead of enjoy the widely-expected ‘window-dressing’ on its final day.
One reason for considering such a possibility was that the index had already moved up sharply on Monday; another was based on the argument that if window-dressing is aimed at making the books look better, then maybe the smart money would take the opportunity to dump bad assets, or sell into strength.
Whatever the case, the STI yesterday stood 16 points higher at 12.30pm probably because some in the market anticipated a final-second push, but after completion of the post-closing adjustments, it recorded a nett loss of 9.09 points at 1,761.56 probably as the smart money quickly sold into strength.
The final reading means that the STI lost just under 50 per cent for the year, both in local currency and US dollars. At the risk of understating the obvious, it was a disappointing performance, given that the bulk of analysts had this time last year predicted the index would rise above 4,000 by year-end.
It was also a disappointment to those who bought in response to Wall Street’s Tuesday rally, though the latter was in all likelihood also due to window-dressing since it came in the wake of the release of awful consumer confidence and housing numbers.
Turnover yesterday excluding foreign currency issues was 457 million units worth $493 million, high by recent standards for a half-day session.
Excluding warrants and the index’s advance-decline score of 7-20, there were 148 gains versus 118 falls in the broader market, suggesting that many players had no time to react to the late selloff in the index.
Not surprisingly, stocks which had led the STI up in 10 minutes between 12.20-12.30pm all ended weaker at 12.35pm. SingTel, for example, rose to $2.63 but ended unchanged at $2.55, DBS sold for $8.60 but ended a nett one cent weaker at $8.42 and UOB was ramped up to $13.18 before finishing at $12.92 for a nett loss of eight cents.
Unlike the over-optimism which marked predictions 12 months ago, analysts this time round are under no illusions about the market’s prospects in 2009, especially in light of a worsening economy and a deteriorating earnings outlook. Most expect a difficult year ahead with much uncertainty shrouding the economic outlook.
Speaking of earnings, China shipyard Cosco Corp on Tuesday issued a profit warning because of doubtful debts and higher shipbuilding costs. It said its subsidiaries have received requests to delay payment from customers in view of the adverse global economic climate and the deteriorating shipping industry outlook. It warned that 2008 profits will be lower than 2007’s. It saw net profit attributable to equity-holders of about $337 million for 2007.
‘This guidance deviates significantly from FY08 consensus estimate of $425 million and our own forecast of $465 million,’ said Kim Eng Research. ‘We are downgrading Cosco to a ‘hold’ and cutting our price target to $1.35.’
The local broker said it now expects Cosco to report $321 million for 2008 and cut its FY09 forecast by 30 per cent to $408 million to account for further contract delays and cost overruns.
It also warned that there is risk of further downgrades because it is unable to determine the full extent of provisioning needed. Cosco’s shares yesterday fell eight cents to 95 cents with almost 30 million shares done.
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STI Suffers ‘Window-Undressing’
Most analysts expect a difficult year ahead with much uncertainty shrouding the economic outlook
By R SIVANITHY
1 January 2009
In yesterday’s report on the penultimate session for the year we pondered the possibility that the Straits Times Index (STI) might be ‘window-undressed’ instead of enjoy the widely-expected ‘window-dressing’ on its final day.
One reason for considering such a possibility was that the index had already moved up sharply on Monday; another was based on the argument that if window-dressing is aimed at making the books look better, then maybe the smart money would take the opportunity to dump bad assets, or sell into strength.
Whatever the case, the STI yesterday stood 16 points higher at 12.30pm probably because some in the market anticipated a final-second push, but after completion of the post-closing adjustments, it recorded a nett loss of 9.09 points at 1,761.56 probably as the smart money quickly sold into strength.
The final reading means that the STI lost just under 50 per cent for the year, both in local currency and US dollars. At the risk of understating the obvious, it was a disappointing performance, given that the bulk of analysts had this time last year predicted the index would rise above 4,000 by year-end.
It was also a disappointment to those who bought in response to Wall Street’s Tuesday rally, though the latter was in all likelihood also due to window-dressing since it came in the wake of the release of awful consumer confidence and housing numbers.
Turnover yesterday excluding foreign currency issues was 457 million units worth $493 million, high by recent standards for a half-day session.
Excluding warrants and the index’s advance-decline score of 7-20, there were 148 gains versus 118 falls in the broader market, suggesting that many players had no time to react to the late selloff in the index.
Not surprisingly, stocks which had led the STI up in 10 minutes between 12.20-12.30pm all ended weaker at 12.35pm. SingTel, for example, rose to $2.63 but ended unchanged at $2.55, DBS sold for $8.60 but ended a nett one cent weaker at $8.42 and UOB was ramped up to $13.18 before finishing at $12.92 for a nett loss of eight cents.
Unlike the over-optimism which marked predictions 12 months ago, analysts this time round are under no illusions about the market’s prospects in 2009, especially in light of a worsening economy and a deteriorating earnings outlook. Most expect a difficult year ahead with much uncertainty shrouding the economic outlook.
Speaking of earnings, China shipyard Cosco Corp on Tuesday issued a profit warning because of doubtful debts and higher shipbuilding costs. It said its subsidiaries have received requests to delay payment from customers in view of the adverse global economic climate and the deteriorating shipping industry outlook. It warned that 2008 profits will be lower than 2007’s. It saw net profit attributable to equity-holders of about $337 million for 2007.
‘This guidance deviates significantly from FY08 consensus estimate of $425 million and our own forecast of $465 million,’ said Kim Eng Research. ‘We are downgrading Cosco to a ‘hold’ and cutting our price target to $1.35.’
The local broker said it now expects Cosco to report $321 million for 2008 and cut its FY09 forecast by 30 per cent to $408 million to account for further contract delays and cost overruns.
It also warned that there is risk of further downgrades because it is unable to determine the full extent of provisioning needed. Cosco’s shares yesterday fell eight cents to 95 cents with almost 30 million shares done.
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