Senior Correspondent
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STOCKS were supposed to run up yesterday because of China's decision to allow more portfolio money into its market, but as it turned out, gains were limited to laggard property stocks and a few penny counters. Wall Street's closure for US Labor Day was always going to rob the market of some liquidity and this probably played a big part in a broadly lethargic day, though a late push in the final few seconds saw the Straits Times Index gain 21.26 points at 2,643.95.
For the most part, trading went according to script with the STI tracking the Hang Seng Index and the latter tracking movements in China. However, the latter only managed to close marginally firmer and although the Hang Seng ended 1.5 per cent higher, this only had a marginal impact here.
However, a firm opening for Europe did help shore up local prices though most of the index's gains came in the final few seconds during the post-closing adjustment period. Stocks pushed up during this time included DBS, Singapore Airlines and UOB.
Turnover excluding foreign currency issues was a relatively low 2.4 billion units worth $1.5 billion, while excluding derivatives, the broad market chalked up 284 rises against 192 falls.
Among the corporate developments of note was the announcement that Advanced Technology Investment Company of Abu Dhabi has offered $2.68 per share for Chartered Semiconductor, confirming months of rumours about an impending deal. However, the news surprisingly led to a seven cents drop in Chartered's price to $2.59 yesterday with 11 million shares traded.
DMG & Partners issued a 'buy' on Chartered with a $3.14 target price based on 1.3x FY09 price/book.
'We have increased our revenue forecasts by 8.3 per cent and 2.7 per cent for FY2009 and FY2010 respectively given the upgraded guidance given by Chartered and now expect the company to turn profitable in FY2010' said DMG. Its target P/B ratio is based on the February 2005-February 2006 period when semiconductor book-to-bill ratio reached a low of 0.77 then rebounded to a high of 1.01.
Meanwhile, the property sector enjoyed selective action, led by sharp gains in Hotel Properties and City Developments. In its morning note, CIMB said that with sky-high property sentiment, depleting inventories and plunging construction costs are motivating property developers to rebuild land banks again.
'Many developers are keen in the Government Land Sale (GLS) sites. Though we expect fierce competition, caution among developers should keep prices from going out of whack. Whilst we retain our 'neutral' position on the sector due to our negative view on heavily-weighted Capitaland, the trigger of GLS sites could provide positive news-flow for listed developers' said CIMB.
In its Sept 4 Singapore Market Strategy, Credit Suisse said that it has lowered Singapore to 'market weight'.
'This follows Singapore's 45 per cent surge since April (and outperformance of 15 per cent). As Singapore has been one of the best performing markets regionally, it is no longer among the least expensive,' said CS.
According to the broker's estimates, the market is trading at a P/B versus ROE discount to the region of 2 per cent, making it the seventh cheapest out of 13 markets. Credit Suisse's target for the STI is 2,991 based on a five year price-book average of 1.88.
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