SG Market Analysis -- 13th Oct 08

STI closed 1,948.33 for the week ended 10th Oct 08, down 348.79 points or 15.18% from previous week. The US$700b revised bailout bill which was passed on 3rd Oct 08 by US House of Representatives did not help the market to reverse it slide as investors start to worry on how the US$700b be used, will it be enough and will global recession be finally here. Since 6th Oct 08, STI was basically under selling pressure through the week. The sudden 1 day reversal of more than 120 points dip due to emergency rate cut globally didn't last long either as people are thinking the rate cut could do no more to help the crisis and the selling continued. The 2,100, 2,000 levels were easily broken down with fear and panic in the market. On 10th Oct 08, MTI released its flash estimate of 3Q08 GDP and there was a contraction of 6.3% and coupled with 2Q08 GDP of 5.7% contraction, Singapore practically is into a technical recession. The first nation in Asia to enter a technical recession. This further brought more fears to the market to cause STI to drop to almost the 1,900 level. Exp0rt activities were the main drag for the contraction and as much MAS has to ease monetary policy to try to revive the export activities. Even the construction sector which was having a double-digit growth in 2Q also taking hit and reduce to single-digit growth. Singapore Government should be rolling out its holding of million dollar of public projects to help fuel the construction activities back to its double-digit growth.

Technically, mid and long term for STI were down. Short-term wise might be seeing some bottoming soon. The DI+ and DI- are negatively spaced and with ADX hitting above 40 level indicating the strength in the downtrend is getting stronger. MACD fell into deeply negative region and no sign of reversal yet. RSI broke the 30% level and fell sharply into the oversold region and might see some flatting around this level to create some temporary bottoming before any oversold rebound could occur. Stochastic signals also drop into oversold region but the signals are pretty close to each other and any moment could cut up for a oversold rebound. There might be some relief in the candlestick indicator as last Friday STI closed with a doji, a gap down doji and potentially might have some rebound coming the way. Any rebound will be capped with resistance at around the 2,100 level and immediate support at the moment was at 1,900. If market sentiment weaken further, 1,800 is within sight in the coming week.


Singapore kicked start its 3Q earning season with SPH reporting its FY08 earnings on 10th Oct 08. Net profit fell 12% due to a 67% drop in profit in its investment. However, its main core business ( the printing ) still able to see growth in profit as compared to last year. It also declared a dividend of 19cents/share this time round and couple with the 8cents/share given early this year, a total of 27cents/share dividend was declared for FY08. Its ROE despite the drop of 12% net profit still maintain at the 20% level. The following is date of the list companies that will be announcing its earnings within this and next month

1. Ascendasreits -- 17/10/08
2. CitySpring -- 11/11/08
3. CapitaMall Trust -- 21/10/08
4. Cambridge -- 30/10/08
5. CapitaComm Trust -- 23/10/08
6. Mapletreelog -- 22/10/08
7. CDL H Trust -- 29/10/08
8. UOB -- 31/10/08
9. FSL -- 21/10/08

For the coming week, STI together with other Asia bourses will be looking at what measures the G7 countries, the G20 countries and the IMF will carry out to calm and bring back stability to the global financial sectors. Current market is rule by fear and panic due to concern of global recession and a repeat of 1929 Great Depression. As long as confidence and calmless are back to the equity markets, a temporary bottom should be formed.

For short-term traders, advice is to remain cautious as market is till too volatile and potentially trading into defensive stocks could provide a lower risk. Any rebound of prices, do not chase it.

For long-term investors with 10 years investment time frame, should be looking from fundamental point of view of a counter and decide on various entry prices to slowly collect, spread out the purchase and that could minimize the downside risk quite an amount.

Regardless a short-term trader or a long term investor, selection of stock/company is very important now. Any company with a high gearing of debt ratio and weak cashflow are best to avoid so as to not to get caught in the case of Ferrochina.