Property main feature in a ho-hum week

Property main feature in a ho-hum week

By R SIVANITHY
SENIOR CORRESPONDENT

THE fall - then rise - of the property sector was probably the most exciting feature of what was a relatively featureless and directionless week in the local stock market.

Close watchers, though, would probably also have noticed the reduced usefulness of movements in Hong Kong and Singapore as predictors of how Wall Street would perform later each day, possibly because the latter seems to constantly run into waves of selling as the economy’s ‘green shoots’ continue to recede into the distance.

Over the five days, the Straits Times Index (STI) edged up seven points to 2,307.98, no doubt heavily influenced in between by periodic bouts of short-selling and covering by traders looking to make a buck in a market bereft of ideas.

Wednesday’s session was possibly the most traumatic for the bulls when a news report suggested the government is considering taxing property gains, news which - not surprisingly - sent the property sector tumbling.

Thursday brought a government statement that was supposed to clear the air. But although stocks rebounded, observers point to still-lingering confusion. In a nutshell, the proposed changes will give the taxman greater leeway in taxing property sales if it can be shown the seller is a trader, which means some people may be taxed while others may not.

Yesterday, however, saw trading settle down to a more ho-hum pace that was set first by Hong Kong, then Europe’s opening. The STI’s movements were anaemic to say the least, reflecting the general momentum loss and its eventual finish with a net gain of just 0.37 of a point. Hong Kong, in the meantime, closed 0.5 per cent weaker, while Europe opened in the red across the board.

Perhaps of greater relevance for those who gauge sentiment by movements in the index was how poorly the STI fared as an advance indicator of Wall Street movements. It used to be that with the Hang Seng Index, the STI had a strong record as a US market predictor. Certainly, this was the case for most of 2008 and 2009.

The relationship, however, appears to have been severed over the past two or three weeks, primarily because Wall Street’s green shoots have run into a wall of selling, while investors in this part of the world are still keen on the ‘buy Asia’ theme that has again surfaced.

Still, if the US market continues to tank as it has, the greening of Asia, so to speak, may not last. Possibly anticipating this as an eventuality was Credit Suisse which, although it retained an ‘overweight’ on Singapore during the week because of likely earnings upgrades, separately pondered the question of whether it is time to ‘go defensive’ because cyclical plays have had their run.

Other notable developments included Rotary Engineering’s capture of a US$745 million contract in Saudi Arabia. Announced on Thursday, the news only nudged the stock up two cents to 76 cents yesterday, but this was probably because its price had started responding to rumours about the deal well in advance of the announcement - two weeks ago, Rotary sold for just 58 cents.

Brokers, however, continued to issue ‘buy’ calls on the stock. CIMB yesterday fixed a target price of 90 cents, while earlier in the week, OCBC Investment Research pegged fair value at 81 cents.

Source : Business Times - 11 July 2009

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