FTSE STI closed 3,156.79, down 1.91 points or -0.06% with a total volume of 2.45b and a total value of S$1.27b. Total number of advance vs decline was 233 vs 149. Of the 30 component index stocks, 11 closed negative, 5 unchanged and 14 closed positive. The top 5 gainer component stocks were :-
1. Jardine C&C +0.110
2. CityDev +0.080
3. Olam +0.080
4. HKLand US$ +0.080
5. UOB +0.070
The top 5 loser component stocks were :-
1. JMH 400US$ -0.800
2. JSH 500US$ -0.400
3. SembCorp -0.050
4. SPH -0.030
5. GLP -0.030
US markets closed positive yesterday night averaging a 1% gain due to optimism on the fiscal cliff. Asian bourses were mostly positive for the day. Nikkei +0.96%, SSE +0.10% and HSI -0.08%. STI failed to hold the gain and close -0.06% with heavy volume and slightly more value as previous days. 14 of the 30 index stocks registered positive closing.
Republican proposed a new offer on the fiscal cliff opening the way to raise tax on the rich (total income more than US$1m) was seen as a positive step to compromise from Obama and his Democrates. Obama later dished out another offer to the Republicans with the income ceiling lowered to US$400k. Should the pace continue like that, possibility of seeing a deal before end of the year is there. However, not to be overly optimistic, one should look at the detail of the fiscal cliff deal. The revenue from taxing rich with more than US$1m income is definitely much lesser than having the ceiling peg at US$400k. Given that US Government needs to spend to create job and with the high debt level presently, every cents count for the revenue. As such even if the deal is compromised but only tax the rich with income more than US$1m is definitely not consider a good deal. Investors should exercise cautious and look at the detail of the deal.
STI experienced high volume today mainly due to Olam as short-sellers have to close the short position due to XR on 27th December 2012. This has caused price to rebound today. It is also possible some funds are buying due to the bond-cum-warrant entitlements. Despite all this, investors especially the retail investors have to be warned that the fundamental issue with Olam remains the same, nothing has changed even with the right issue. The debt level still hand, company still in negative cash flow. The fundamental can only change to positive if and only if the management starts to sell off assets to bring down the debt level. Do not simply just follow the funds even if they show support for Olam. Remember, the funds can afford to loose a million but retail investors can't.
