Thursday, 15 October 2009
Volume is there, but where’s the excitement?
It’s not often that a day in which $1.3 billion worth of business gets done is described as ‘insipid’ and ‘boring’ by brokers who spent most of their time twiddling their thumbs and fighting to stay awake. Yesterday however, was one such day as the local market continued to flounder in a stupor that started on Monday.
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Volume is there, but where’s the excitement?
By R SIVANITHY
14 October 2009
It’s not often that a day in which $1.3 billion worth of business gets done is described as ‘insipid’ and ‘boring’ by brokers who spent most of their time twiddling their thumbs and fighting to stay awake. Yesterday however, was one such day as the local market continued to flounder in a stupor that started on Monday.
On the one hand, it says much about the progress made by the local market that 1.9 billion units excluding foreign currency issues can change hands and yet dealers could find themselves with little to do.
After all, when the market was drifting lower in the first quarter, daily volume was no more than $700-800 million on a good day, so this week’s ‘low’ volume still compares favourably.
On the other hand, the fact that many brokers described the two sessions this week as ‘quiet’ and ‘listless’, could well suggest that most of the volume is being generated by programme trades, institutional movements and proprietary accounts which in turn means public participation is minimal.
There was speculation that some of the big funds, having already achieved their targets for the year, may have closed their books early, thus contributing to the sudden slowdown. An alternative and equally plausible explanation was that some element of ‘buy in anticipation, sell on news’ may have crept into trading, given that prices have been drifting despite the release of encouraging economic news.
Whatever the case, the Straits Times Index yesterday surrendered an early single-digit lead to finish a net 12.07 points lower at 2,668.4 lower as it first tracked Hong Kong’s Hang Seng Index followed by Europe’s opening in the late afternoon.
Among the index stocks that garnered increased attention was Singapore Press Holdings, which on Monday reported a 3.6 per cent drop in net profit for the year ended Aug 31 to $422 million. The stock ended two cents higher at $3.90 with 6.6 million traded.
Analysts were divided in their calls on SPH. Credit Suisse maintained an ‘outperform’ with a $4.41 target price saying that the company is a key beneficiary of a pick-up in private consumption. ‘The stock continues to trade at a substantial 19 per cent P/E discount to the market, versus a 10-year average premium of 28 per cent,’ said CS.
Similarly, Deutsche Bank also called a ‘buy’ and set a $4.30 target based on a sum-of-parts model. Elsewhere though, JP Morgan called an ‘underweight’ with a December 2010 target of $3.20 because of a possible move by SPH into the property sector.
‘The group’s deviation from its existing core publishing business would substantially change its risk profile and affect the defensive nature of the stock, in our view,’ said JPM. ‘More importantly, the shift towards a more conglomerate-like business model would potentially trigger a derating as the market applies a conglomerate discount to the sum-of-parts valuation.’
In its Oct 12 Asia Equity Strategy, Citi Investment Research said there are still too many sceptics on the banking sector. ‘Banks remain a consensus underweight. We argue they should not be . . . Asia hasn’t had a credit cycle since 1997 while corporate debt is at multiple-decade lows and will rise as the recovery takes hold. Also with a loan-to-deposit ratio of 74 per cent, banks have room to lend,’ said Citi.
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