Senior Correspondent
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BOOSTED by ever-increasing volume and a volatile but ultimately firm Hong Kong, the Straits Times Index yesterday shot up 47.38 points to 2,624.04, bringing its gain for the past 12 trading sessions to 317 points, or 14 per cent, and its gain for the year to year-to-date to just under 50 per cent.
Recovery hopes supposedly continued to underpin sentiment, although much of the trading yesterday - and the days before - no doubt was enhanced by program buying in advance of an expected rise on Wall Street. Europe's mixed opening however and a dip in the US futures market, cast some doubt over whether this would actually be the case.
Turnover remained high at 3.3 billion units worth $2.5 billion excluding foreign currency issues and excluding derivatives, the advance-decline score was 319-130. The average unit value traded was 76 cents, in keeping with a recent focus on penny stocks. For example, UniFiber, ending at seven cents, traded 156 million units while Ban Joo, ending at eight cents, saw almost 100 million shares changing hands.
China stocks such as Cosco, Jiutian, China Energy, Yangzijiang, Synear and China Sports all also chalked up large volume and decent price movements, as did property favourite CapitaLand.
Broking reports on the property sector were dominated by calls on CapitaMall Trust (CMT). Deutsche Bank rated the counter a 'hold' with a $1.43 target price based on a dividend-discount model while Morgan Stanley issued an 'equal weight' recommendation, saying that the counter lacks defensiveness and possesses unattractive valuations. It set a $1.47 target; CMT yesterday rose four cents to $1.62.
Elsewhere in a curtain-raiser for Singapore Airlines's (SIA) first quarter results, Morgan Stanley (MS), in a July 24 report, said that it expects the airline to report marginal earnings per share of around two cents for the three months ending June 30. 'Our almost break-even operating profit of $8 million is based on a passenger yield decline of 9 per cent. If passenger yield were to decline more than 10 per cent, we believe we could see an operating loss which would likely negatively surprise the market and potentially trigger profit-taking on the stock,' said MS. It set a $9.30 target price based on 0.8x estimated FY2009 book value. SIA fell eight cents to $13.54 yesterday.
Also rated an 'underweight' by MS on July 24 was Chartered Semiconductor with a $1.60 price target largely because of a weak balance sheet. UBS Investment Research on the same day issued a 'sell' on Chartered and lowered its target price from $1.85 to $1.70, saying there were no signs of a turnaround yet, while Nomura said that it was 'neutral' on the stock with a $2.30 target, saying it is concerned about the chipmaker's funding gap and relatively high break-even utilisation. Chartered's shares were unchanged at $2.22 yesterday.
Credit Suisse (CS) in the meantime, on Monday said that it has raised its 12-month target for the MSCI Asia ex-Japan index by 18 per cent on the grounds that Asia in a 'sweet spot' of earnings upgrades. The index target of 500 implies a prospective price-earnings of 14x and assumes an estimated 30 per cent earnings growth in 2010. CS said that it believes that Asia is still 16 per cent undervalued based on a six-factor valuation model that includes historical PE, price-to-cash flow and dividend yield.
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