Monday, May 14, 2012

Market Summary -- 14th May 12

FTSE STI closed 2,864.12, down 19.28 points or -0.67% with a total volume of 1.82b and a total value of S$986M.  Total number of advance vs decline was 90 vs 346.  Of the 30 component index stocks, 11 closed positive and 19 closed negative.  The top 5 gainer component stocks were :-

1. JMH 400US$  +1.260
2. JSH 500US$  +0.570
3. SembCorp  +0.090
4. Jardine C&C  +0.060
5. GLP  +0.035

The top 5 loser component stocks were :-

1. UOB  -0.200
2. DBS  -0.190
3. KepCorp  -0.150
4. Wilmar  -0.120
5. OCBC  -0.100

US markets closed mixed last Friday with DJ and S&P500 in the red but off intra-day low and Nasdaq just managed to edged out a tiny gain as investors reacted to JP Morgan trading loss of US$2b and the Greece saga.  Asian bourses were mixed for the day after China cutting bank reserve ratio by 0.5% over the weekend to 20%; the 3rd time it loosen monetary policy to spur growth.  Nikkei closed +0.23%, SSE -0.60% and HSI -1.15%.  STI gave up earlier gain and closed -0.67% in a volume less than 2 billion but total value of the day came in less than S$1b.  11 of the 30 index stocks managed to close positive.

It was the 3rd times Greece failed to form a coalition government after the election and should it fails to do so by this week, Greek will go into another election in mid-June.  As such European bourses and US future were reacting to the news and that was when STI gave up the earlier gain ( due to China cutting RRR by 0.50% over the weekend ) and closed in the red.  Investors at the moment are focusing on Greece's failure to form a government and possibility of exit Euro and default.  While the option remains a high possibility but one need to look at the impact of that before any panicking to it.  EU Finance Ministers will be having a meeting probably in discussion of how to deal with Greece should it exit Euro.  Comparing with 1 or 2 years ago when Greece's debt surfaced, the impact of Greece exit of Euro and default should be well absorb by financial sector now.  Investors should focus on the most important issue in EU, that is the austerity vs growth issue.  There is a need for EU leaders ( probably in end June EU Summit ) to seriously discuss about a balance strategy between continuity of austerity to cut debt and at the same time putting in measures to spur economic growth as EU is already in mild recession.  Getting all EU leaders into the same frequency and consensus of the measures to tackle the austerity vs growth issue will be prime objective for the coming EU Summit in June.  It might not provide a solution then but starting small little steps towards the right direction is more important.  This should be what investors focus on rather than the Greece issue.

For Singapore, apart from some blue chip companies with a weaker 1Q earning, majority of them were having firm earning and that is something encouraging to the Singapore economy as a whole.  Investors should focus on this stronger companies and should there be any weakness in the price due to panicking, that will be the opportunity.

As a whole, rather than focus on the doom and gloom of the EU crisis, instead watch out for opportunity as for every crisis there will be great opportunity.  Monitor the resolution of the austerity vs growth issue and that will be the great opportunity one should be looking at.

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