SG Market Analysis -- 6th Oct 08

STI closed 2,297.12 for the week ended 4th Oct 08, down 114.34 points or 4.74% from previous week. STI started the week with a weak opening despite the news that US Congress agreed on the US$700b bailout bill over the weekend. However, thing turned sour fast as House of Representatives rejected to pass the US$700b bailout bill and that STI to drop at least 120 points on 30th Sep 08 in reaction to the failed bailout bill. It was a sharp recovery in the second half of the day as probably due to end of quarter window dressing that helped STI recover almost the 120 points loss in the morning. News that US Government after the House of Representatives failed the bill has a re-work on the bill for the US Senators to pass it also assisted STI in the sharp recovery. Nevertheless, for remaining of the week, STI moving in a narrow range despite the US Senators passed the bill in the later part of the week as investors still nervous and cautious about whether will the House of Representatives passed the revised bill. Another concern on investors' mind was US into recession, how deep will that be if US did enter recession. STI closed under the 2,300 level as investors await the result of the voting of the revised bill by the House of Representatives on Friday.

Technically, mid to long term STI is on a downtrend. Short-term wise, no sign of rebound yet also. DI+ and DI- are still negatively spaced and with ADX signal slowly moving towards the 40 level indicating the downtrend is gaining momentum. MACD signals are deep in negative region and no sign of convergence occur. RSI has just dipped below 30% into the oversold region. Stochastic stayed relatively flat just above the 20% level but no sign of cutting up either. Immediate support for STI would be the 2,200 level and if that failed to hold, potentially 1,800 - 1,900 is possible. If there is any rebound, the upside would be capped around the 2,400 level.



Last Friday, the House of Representatives approved of the revised bailout bill and US markets reacted with a drop as investors now turned their concern into the status of the US economy; recession ?

For the coming week, STI should still be trading in a very cautious sentiment as even though the bailout bill was passed, concern on whether US will go into recession or not, which eventually will affect Singapore economy should be weighing heavily on investors' mind. Investors should also be looking towards 10th Oct 08 when the government will be releasing the first estimation of 3Q08 GDP. The figure could decide whether Singapore is into a technical recession or not. The coming week also starts the quarter earnings season for Singapore companies and as of today, the date for the list of companies announcing their earnings is

1. SPH -- 10/10/08
2. Ascendasreit -- 17/10/08
3. StarHub -- 5/11/08
4. CitySpring -- 11/11/08


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 3 to 5 years 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. Traditionally, during a bear market if one is to invest in mid-cap stocks and hold till the next bull cycle, the rate of return will be higher than the blue chips. This is something a long-term investor could consider.