SG Market Analysis -- 11th Aug 08

STI closed 2807.54 for the week ended 8th Aug 08, down 98.53 points or 3.4% from previous week. It was a volatile week for SG market with the market experienced heavy sell down on commodity and marine/offshore counters due to falling of crude oil price to below US$120/barrel. There was a slight rally up in reaction to US Federal Reserve's decision to maintain its interest rate at 2% but that rally was short-lived as when crude oil price rebound back to US$120/barrel and some weaker than expected corporate earnings occurred, the selling resume. Property stocks also encountered heavy selling pressue due to concern that the credit market problems might hit property market. There was also a sell down on S-Shares in reaction to Shanghai market of selling down as investors were in general disappointed about an Olympics rally. The most eventful for the week was Cosco shares, it faced heavy selling pressure in reaction to a sudden retirement announcement of its President despite posting a strong set of result the day before. Even with a clarification from the company, the share price still unable to rebound up.

On the corporate earnings, the 3 local banks ( UOB, DBS and OCBC ) posted their quarterly earnings for the week. UOB reported a 2Q net profit 2.7% higher, DBS 2Q net profit up 16% and OCBC 2Q net profit drop 20%. Even though both UOB and DBS result were better than expected ( with OCBC missing expectation ), the general consensus is expecting slowing of loan growth in the second half of the year. As such analysts has cut their target price for FY 2008. SGX also reported its quarterly earning in the week and for its 4Q net profit, it was down 48.7% as compared with the same period of 2007 mainly due to lower daily volume and lesser IPO. On the marine and offshore sector, SembMar and Cosco posted their quarterly earnings for the week. SembMar 2Q net profit was up 51% due to strong demand for oil rigs, beating forecast. Cosco on the other hand posted a 60% rise in its 2Q net profit, beating forecast, and its order book for ship building and repair work remains intact. Conglomerate F&N reported a 3Q net profit up of 13.6% due to its strong performance in its brewery and property groups. StarHub's 2Q net profit fell 21% missing market expectation. Below is the list of companies that will be reporting their quarterly earnings for the coming week.

1. Ho Bee 11th Aug 08
2. ST Engg 12th Aug 08
3. GoldenArgi 12th Aug 08
4. UOL 12th Aug 08
5. SingTel 12th Aug 08
6. CityDev 14th Aug 08
7. Wilmar 14th Aug 08
8. Noble 14th Aug 08
9. Swiber 13th Aug 08
10. Ferrochina 14th Aug 08
11. KS Energy 14th Aug 08
12. Sinotechfibre 14th Aug 08

For the coming week, direction of SG market will be driven by corporate earnings ( quite a number of blue chips are reporting this week ), US finance sector status, crude oil price and regional markets. On Monday, 11th Aug 08, Singapore will be releasing its 2Q GDP number. Annualized projection was lowered from 4%-6% to 4%-5% to cater for slowing growth in the US that will affect Singapore.

Technically, STI is posed for more downtrend in short-term. MACD starts to drop further into negative zone, Stochastic heading towards the 20% level and has not show any sign of cutting up. RSI though still around the 50% level but also showing sign of moving down. STI is now resting at the psychological level of 2800 and if selling pressure remains it could re-test the March 08 low of around 2750 level. A strong finish from US markets on Friday should be able to see some rebound this coming Monday with an immediate upside capped around the 2850 - 2860 level; also around the 50d EMA level. If the rebound momentum is strong enough, STI could pose to re-test the 3000 level but it looks like a hugh task for it. Downside for the moment is STI going down to re-test the March 08 low and if that failed to hold, the eventual target would be 2600 level.