Friday, June 8, 2012

Market Summary -- 8th Jun 12

FTSE STI closed 2,737.89, down 21.37 points or -0.77% with a total volume of 918M and a total value of S$754M.  Total number of advance vs decline was 87 vs 235.  Of the 30 component index stocks, 4 closed positive, 2 remained unchanged and 24 closed negative.  The 4 gainer component stocks were :-

1. JSH 500US$  +1.120
2. Capitaland  +0.010
3. SPH  +0.010
4. CapMallsAsia  +0.005

The top 5 loser component stocks were :-

1. Jardine C&C  -1.450
2. JMH 400US$  -0.350
3. DBS  -0.170
4. CityDev  -0.160
5. KepCorp  -0.140

US markets closed mixed yesterday after US Fed comment on stimulus despite China cutting interest rate.  Asian bourses after past days of rally felt the disappointment in Fed comment and closed in the red for the day.  Nikkei closed -2.09%, SSE -0.51% and HSI -0.94%.  STI fell 0.77% in a thin volume day with less than 1 billion in volume.  Only 4 of the index stocks managed to close positive.

Firstly, US Fed giving no hint of stimulus which was expected but majority felt disappointed.  After past 3 rounds of monetary easing ( QE1, QE2 and Operation Twist ) none of those worked for US economy recovery especially the job markets.  Even another QE3 or up to QE10 also will not make a difficult.  The underlying problem with US is the lawmakers failing to act together to resolve the economy issue.  Investors eying for QE were in totally irrational and perhaps know little about US economy problem.  The irrational selling down due to that disappointment definitely create great bargain hunting for STI stocks.  US perhaps need to follow what Germany is doing, going for hash and strict restructuring of their economy and not every time rely on life support ( stimulus ).  US advising Europe how to resolve EU debt crisis ? Maybe they need to think twice as they can't even sort out their own problem.  Perhaps they need to like China dare to reform in their economy model when China decided to shift the model to consumption based.

Secondly, China cut interest rate since 2008 by 25 basis point.  With this surprise move, there are two sides of view.  The bearish view was that China economy will be slowing more than expected and force China Government to immediate take action.  The other side of the view would be Chinese Government is doing what should be done before it is too late.  Whatever the view is, the true hard fact is China economy is slowing down and if Chinese Government doesn't act, social problem will surface and it will not be easy to calm the social unrest given China huge population.  The easing will not be the first and more yet to come.  As mentioned in my 1st Jun analysis China monetary will not cause global stock markets to rally ( like what we see today all in the red ) as China never have the intention to be the superhero to save the world but rather looking after their own as highest priority.  Nevertheless, the step taken by China Government is part of the game changer events in June and others will be from the Europe.  Note, US stimulus IS NEVER part of the game changer event even if they do roll out one.

Lastly, news from Europe continue to surface with Germany agreeing to 2-speed Europe and slowly pieces by pieces this will form the game changer events.

There should be one panic selling within the next 2 weeks and will be opportunity to position for 1H window dressing and next month corporate earning.

Forget about US, they can't even solve their own problem and keep surviving on life support.

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