Thursday, June 28, 2012

Market Summary -- 28th Jun 12

FTSE STI closed 2,846.82, up 5.22 points or +0.18% with a total volume of 1.40b and a total value of S$1.20b.  Total number of advance vs decline was 144 vs 211.  Of the 30 component index stocks, 17 closed positive, 1 remained unchanged and 12 closed negative.  The top 5 gainer component stocks were :-

1. Jardine C&C  +0.870
2. CityDev  +0.170
3. SembMar  +0.130
4. SembCorp  +0.120
5. F&N  +0.070

The top 5 loser component stocks were :-

1. HKLand US$  -0.110
2. SGX  -0.100
3. StarHub  -0.040
4. Olam  -0.030
5. OCBC  -0.030
5. Capitaland  -0.030

US markets rose at least 0.7% yesterday night due to better data in Durable Goods and Housing Sales data.  Asian bourses were mixed for the day with Nikkei closed +1.65%, SSE -0.95% and HSI -0.79%.  STI managed to close positive with a 0.18% gain in yet another day seeing total value exceeded the S$1b level.  17 of the 30 index stocks managed to register positive closing.

It was a day of gain before European bourses opened but soon when European markets sank into the red, those Asian bourses soon gave up gain and some ended in negative region.  Pre-EU Summit nerve dictate the direction of European bourses.  Today starts the 2 days EU Summit.  Prior to that lot of news flow happened but do not over expect or maintain overly pessimistic towards the outcome of the Summit.

The Summit is able to produce a quick fix or one-fix-all solution to the current crisis.
The Summit basically produce nothing as EU leaders still trying plain talking out of the crisis.

The above 2 extreme scenario WILL NOT happen.  As such do not attempt to be overly optimistic or pessimistic towards the outcome of the Summit.  A more realistic will be all the EU leaders agreed on the 130b Euro growth package proposed by Germany, France, Italy and Spain.  Should the Summit also provide detail on how, where and what to spend on the growth package, that will be additional bonus.  Talks of Euro bonds, EU Bank Union etc, don't pin hope on it especially the Euro bonds.  As mentioned before Euro bonds is like 赤壁之战中铁环相连锁 (in the story Romance of The Three Kingdoms at the battle of Chibi, Cao Cao was tricked into chaining up all his battle vessels and in the end one caught fire, the rest can't move away from it and all vessels sank).  Euro bonds basically is debt sharing among the Euro bloc nations.  With the current situation if sudden introduces Euro bonds just to save this crisis and without proper planing of the Do's and Don'ts on Euro bond will be a very dangerous things.  If not managed properly this would be a potential deadly bubble in the future as if one Euro nations in trouble, the rest will be implicated and the issue will be worse than current crisis.

Also watch out for ECB as so far it has not been doing much but waiting for EU leaders to give the green light to act.  A highly possible would be for ECB to cut interest rate in the coming July meeting to stimulate growth.

After EU Summit and 1H window dressing, there will be earning season next month.  After that market should start to consolidate again.

Only maintain cautiously optimistic stand and not to the extreme of bullish or bearish.

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