$12.4b wiped off value of Singapore market in November

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A WHOPPING $12.4 billion was erased from the market capitalisation of companies listed on the Singapore Exchange (SGX) in November - after a gloomy October in which $123.5 billion was cut from their value.

The combined market cap of the 785 companies listed on SGX was $379.1 billion last night - 3.2 per cent down from $391.5 billion at end-October and the lowest level since February 2005.

Stock prices were hit by a slew of bad news during November. Singapore officially slipped into a recession, numerous companies reported earnings that were below expectations, and the global market turmoil continued.

On Nov 21, the Ministry of Trade and Industry (MTI) said that real gross domestic product fell 0.6 per cent in Q3 2008 from a year earlier, confirming that the economy was officially in a technical recession for the first time in seven years. A deeper downturn is expected in 2009, MTI said. And on the global front, news emerged in November that Citibank, the largest US bank, was on the brink of collapse.

Share prices of many companies listed here also took a beating after analysts said that they failed to meet expectations in the Q3 earnings reporting season and downgraded their stocks.

DBS Group Research, for example, said that Q3 earnings for the Singapore listed companies it covers dropped 7 per cent year-on-year. Some 33 per cent of company earnings were below expectations, with the property, technology and telecom sectors disappointing, said analyst Janice Chua. 'The current global financial crisis is the worst of its kind since the Great Depression,' she said.

The Straits Times Index, which started November at 1794.2 points, closed at 1732.6 points yesterday.

DBS Group, which announced in early November that it would slash 900 jobs or 6 per cent of its workforce, took a beating. The bank lost 14.7 per cent of its market cap during the month, under-performing peers United Overseas Bank, which gained 1.2 per cent, and OCBC Bank, which gained 5.1 per cent.

'DBS's under-performance to local peers has become more pronounced this month for several reasons,' UBS Investment Research said in a Nov 27 note. 'We believe that among them are: fear of capital raising, off-balance sheet risk and potential impairment charge for its Hong Kong franchise.'

Standard Chartered's announcement of a rights issue this week has raised concerns as to whether DBS could be next, the research firm added.

STI component stocks Jardine Matheson and Jardine Strategic, respectively the fourth and sixth-largest companies listed on SGX, were also hit badly. Jardine Matheson lost 23 per cent of its value in November, while Jardine Strategic shed 18.4 per cent.

Property developers, which suffered big drops in their market caps in October, fared better in November. An exception was Keppel Land, which lost 26 per cent of its value during the month.

SingTel, still by far the biggest listed company here by market cap, gained 4.9 per cent in November as analysts said that telcos are key defensive stocks in these uncertain times.

Looking ahead, things are expected to get worse for listed companies here. STI targets have been marked down further by several brokerages, with some analysts pegging the worst-case index target around 1,500 points - which assumes a fall of another 13 per cent from yesterday's close.

'Going into 2009, the whole stock market will continue to face many challenges, most of them coming from the macroeconomic front,' said OCBC Investment Research analyst Carey Wong. Besides having to contend with a global economic slowdown, investors will also encounter continued uncertainty brought on by the financial meltdown and credit crunch, currency instability, and increased volatility in the stock markets, he said.

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