Senior Correspondent
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FEW, it seems, have any inkling what the market will do from one week to another. Last week was expected to be a lacklustre one, with stock prices not seen to go anywhere. But the market turned out surprisingly strong. The Straits Times Index surged 122.98 points for a 5.33 per cent gain to 2,430.96 from the previous week. All our portfolios gained as well, with the average advance being 6.1 per cent.
The portfolio made up of stocks with the lowest forward price-earnings ratio was the star last week, putting on 9.2 per cent. The smaller cap property developers in the portfolio - Ho Bee and SC Global - were among the prime movers in the portfolio. They gained by 22 per cent and 16 per cent respectively. Pacific Andes and Mercator Lines also pulled their weight, the former added on 15 per cent and the latter 16 per cent.
The lowest price-to-book portfolio was the second-best performing portfolio by popping some 7 per cent. It was lifted by among others, Allgreen (up 12 per cent), Hong Fok (up 13 per cent) and Pacific Andes (up 15 per cent). Our portfolios are on average up 25 per cent from mid-October last year.
For this week, dealers expect shares to decline after last week's sharp gains. 'The market may have got ahead of itself on US earnings excitement. There are still a lot of earnings to come, a lot of potential for negative surprises,' Dow Jones Newswires quoted a local house trader as saying. Phillip Securities technical analyst Phua Ming-Weii said the recent upswing on the STI would be tempered by profit-taking amongst traders. 'The recent rally has been rather sharp and we are beginning to see profit-taking come into the markets,' the analyst said.
However recent weeks have shown how difficult it is to predict how the market will do in the short term. In the words of Wong Kok Hoi of APS Asset Management, it is easier to predict where the market will be in three or five years from now than it is to predict what it will do in the short term.
Our portfolios were created in mid-October last year with $5,000 allocated to each stock. The purpose of the portfolios is to provide real-time tracking of various trading strategies - namely, buying the stocks that are the most recommended by analysts, those that have seen the highest upgrades by analysts, the one-year top losers, the highest dividend-yielding stocks, stocks with the lowest forward price-earnings ratio and those with the lowest price-to-book ratio.
The process is mechanical - no qualitative judgement is exercised. Stocks that appear in the portfolios are not necessarily good buys. But as the status of the portfolios shows, the most bombed-out stocks have provided the best returns to investors brave enough to buy them.
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