Senior Correspondent
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ALTHOUGH the Straits Times Index rebounded 32.13 points to 2,636.19 yesterday, overall trading was less buoyant and more mixed than earlier in the week, probably due to Wall Street's recent bouts of uncertainty and China's slide, which was brought on by fears that the Chinese government might soon introduce measures to deflate the massive speculative bubble in stocks.
The STI, which has now risen 1,180 points, or 81 per cent, in a little over four months since closing at 1,456 on March 9 - including 300 points since the start of this month - yesterday underwent its customary dependence on gyrations in Hong Kong's Hang Seng Index before eventually finishing with a flourish, probably thanks to buying ahead of an expected bounce on Wall Street on Thursday.
Turnover was significantly lower than it was earlier in the week - excluding foreign currency issues, some 2.1 billion units worth $1.87 billion were traded compared with Tuesday's 3.3 billion units worth $2.5 billion.
Banks played a big part in the STI's afternoon run-up, led by a 42-cent jump in DBS to $13.78 on expectations of strong earnings.
Not all analysts, however, were positive on the outlook for the stock. In a 'neutral' call yesterday, CIMB described DBS as being 'ripe for profit-taking' and said that although earnings surprises are possible, any moderation in non-performing loans is likely to be because of massive liquidity injections in China.
Property stocks ended mainly firmer despite an observation by National Development Minister Mah Bow Tan about flickering signs of speculation in the sector.
DMG & Partners was one house that shrugged off any concerns that the government might act to rein in speculative fever in property when it maintained its 'overweight' on the sector, saying that it is too early to sell.
'If the government acts, we believe the minister's comments suggest a change from demand-oriented to supply-oriented anti-speculative measures, similar to the 1990s, which would be less negative for the market. Subsequent to a proposed tax amendment a few weeks ago, property stocks fell 3 per cent over one day while property stocks eased 4 per cent when a slew of anti-speculative measures were announced in May 1996,' said DMG.
In the property sector, CapitaLand stood out with a one-cent loss at $3.99 after reporting a 28 per cent drop in Q2 revenue year-on-year and a $157 million loss after tax and minority interests that came because of revaluations and impairment charges.
In a 'hold' call, OCBC Investment Research said that for the time being, it is retaining its $3.34 fair value for the stock, at least until after an analyst briefing.
In calling a 'buy' on Venture yesterday, OCBC Investment Research said that there is potential for a Q2 revenue and earnings surprise from the addition of new customers in its ODM (original design manufacturing) business and possible writebacks from CDO (collateralised debt obligations) investments which have all been almost fully marked down. Although the broker believes that the road out of recession will be long and arduous, it has revised Venture's valuation up from 8x FY09 earnings to 12.5x blended FY09/10 earnings, which gives a fair value of $9.26. Similarly, Macquarie Research on Wednesday wrote of a possible bonus from Venture's CDO portfolio in an 'outperform' recommendation that set a $9.80 target price. Venture finished 60 cents up at $9.19.
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