Wednesday, December 11, 2013

Market Summary -- 11th Dec 13

FTSE STI closed 3,060.74, down 20.98 points or -0.68% with a total volume of 1.43b and a total value of S$1.06b.  Total number of advance vs decline was 106 vs 289.  Of the 30 component index stocks, 2 closed positive, 4 unchanged and 24 in the red.  The 2 gainer component stocks were :-

1. JMH 400US$  +0.050
2. THBEV  +0.010

The top 5 loser component stocks were :-

1. UOB  -0.320
2. DBS  -0.180
3. Jardine C&C  -0.100
4. OCBC  -0.090
5. CityDev  -0.070

US markets fell yesterday.  Asian bourses were not spared the selling pressure with all in the sea of red.  Nikkei -0.62%, SSE -1.49% and HSI -1.71%.  STI continued its losing days with another 0.68% drop with thin volume and value.  Only 2 of the 30 index stocks managed to register positive closing.

Many cited profit taking as a reason for the down day in US and Asia.  There are 2 factors contributing to the selling.  Fund managers doing year end portfolio closing (should last till mid or third week of the month) and a nervous ahead of next week US Fed FOMC meeting.  The later is obvious as many fear the tapering.  US lawmakers have somehow managed to strike a deal on the budget so that if that can be passed in the House, it can avoid another shutdown and the debt ceiling saga next month.  Well not to get overly excited yet, nothing is confirmed until US President sign the bill.  US lawmakers are renowned of doing 'Hollywood' movie style of action in their decision, many twists and turns and the proposed deal is not so straight forwards as one political party has to give up something in order to compromise on the deal.  The problem is compromising, and if that is a simple task, they would have solved the debt ceiling issue in 2011 when it first surfaced and US Government will not enter partial shutdown last month already.

For STI, selling continued given that most of the sentiments are negative.  The avoiding penny stocks mindset, negative sentiment from analysts with regard to US Fed tapering coupling with fund managers rushing to close account before their deadline, all just add up to market being bearish biased.  Looking at the bright side, those actions listed only contribute to cheap bargain hunt for long-term investors.

Singapore inflation is 2% (on the street it can be more than 2%), bank interest rate average 0.1%, CPF special account (risk-free) interest is 4%, average S-Reits dividend yield is 6.5%, how one going to hedge against inflation ? If they are negative on S-Reits, ask them how they hedge against inflation ?

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