Monday, June 4, 2012

Market Summary -- 4th Jun 12

FTSE STI closed 2,698.90, down 46.81 points or -1.70% with a total volume of 1.05b and a total value of S$864M.  Total number of advance vs decline was 53 vs 343.  Of the 30 component index stocks, 1 remained unchanged and 29 closed negative.  The top 5 loser component stocks were :-

1. Jardine C&C  -0.870
2. JSH 500US$  -0.480
3. JMH 400US$  -0.73
4. UOB  -0.290
5. HKLand US$  -0.220
5. CityDev  -0.220

US markets fell at least 2% last Friday after the employment data fell very short of expectation.  Over the weekend China released its service PMI data also showing slowing down of growth.  Coupling with EU debt crisis, Asian bourses taking the cue all on selling mode for the day.  Nikkei closed -1.71%, SSE -2.73% and HSI -2.01%.  STI fell 1.70% but with very thin volume and 29 of the index stocks registered negative closing.

Firstly, US employment data fell much lower than expectation and President citing mainly due to factor in EU debt to create jobs.  Well as mentioned many times, failure to create jobs in US is mainly due to the political parties fighting among each others and not so much an issue of external factors.  With such an awful set of data, analysts are predicting US Fed will do another round of easing this June.  As far as concern, as long as the lawmakers can't get their acts together and work hand in hand to create jobs, no matter how many round of easing the US Fed going to launch, at the end of the day the same problem will resurface later.  So for those who are hunger for the so-called QE can rally global markets ? think twice and make sure you know the exit when it is time to exit.

STI selling today is not the panic selling that I was talking about last week.  It was just a normal reaction to last Friday and over the weekend US and China weak set of data.  Fund managers selling out as they have much more to lose if they don't sell off as compared with retail investors.  Capitulation or panic selling is not like what happened today.  Capitulation is still possible this month and perhaps 15th, 18th and 19th of June might be the period for it.

Many also anticipating where STI will go since it closed below 2,700.  Forget about where STI will land, just focus on the fundamental strong stocks and lock in the price which you think it is cheap in term of valuation.  With patience and holding power, most of the time you will not get it wrong.  On a technical aspect, STI 2,700 level is a "Singapore in technical recession" level.  With the weakness in US and China and EU debt crisis yet to showing sign of improvement, Singapore with its open economic model is very highly subjected to weakness and hence it will not be a surprised should Singapore economy enters technical recession and that is what STI is currently factor in.

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