Thursday, June 20, 2013

Market Summary -- 20th Jun 13

FTSE STI closed 3,133.26, down 80.53 points or -2.51% with a total volume of 2.07b and a total value of S$1.74b.  Total number of advance vs decline was 59 vs 372.  Of the 30 component index stocks, all 30 closed in the red.  The top 5 loser component stocks were :-

1. JMH 400US$ -2.490
2. Jardine C&C  -1.020
3. JSH 500US$  -0.560
4. UOB  -0.560
5. DBS  -0.510

US markets closed at least -1.00% last night and Asian bourses were all on selling mode for the day.  Nikkei -1.74%, SSE -2.76% and HSI -2.88%.  STI tracking regional bourses sank 2.51% in thin volume and value day.  All the 30 index closed in the red.

Investors should be put the blame on US Fed for the selling but in fact like in the past US Fed did nothing wrong by just stating the fact and maintained status quo.  The bond buying program if economic conditions permit will end in middle of 2014 but should the economic condition does not permit, the US Fed will be flexible enough to extend the bond buying program.  Nothing absolutely wrong with that, what was wrong was basically investors' hope of US Fed.  Investors were hoping US Fed has a clear and detail timeline of when to taper.  The selling down was again over hoping vs reality cases.  Nobody can predict what will happen 1 year later that is will US economy be strong to stand on its own foot.  US Fed will not immediately shut off the stimulus and if everything go according to the plan, 6-month or 9-month before mid 2014, the tapering will start.  Investors should monitor the economic data then rather than acting now.

HSBC released China June flash PMI coming in at 48.3 and that piled on the selling pressure for global markets.  Perhaps it is time to factor in a slower growth of maybe even 5% to 6% GDP for China due to fundamental shift of the economic growth model, in fact fundamental shift of growth model for the whole world, one that shift to low and sustainable growth model.

STI tracking regional bourses sank more than 2% with blue chips taking the biggest hit and not the mention S-Reits as fear of interest rate hike resurfaced.  Investors have to think rationally the relationship between interest rate and Singapore environment and the selling of S-Reits might not be really justified.  Funds selling do not necessary translate to investors need to follow suit.  The selling of STI could also be due to the haze problem in Singapore presently when PSI hitting record high of more than 300 all thanks to Indonesia.  Well unhealthy air-condition making investors uncomfortable and not able to think rationally, acting emotionally.

Keep an eye on next week end of the month 1H2013 window dressing.

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