31 May 2011
Taking Stock of May 2011. Onward June.
By Charlie Lau Suan Liat
Technical comment
The Straits Times Index [STI] closed May 31 2011, 3160 points, down 20 points from April 29 [Closed: 3180 points]. Most market favorite second liner stocks in the 30 Straits Times Index components were down except for some heavyweights, bank stocks and some illiquid ones like Jardine C&C, Jardine Strategic and Jardine Matheson. Second & third liners in the general market were mostly down true to the jingle, “Sell in May & go away”.
May saw some stocks – market favorites, commodity stocks and S-stocks down from end April and should be testing new Lo in June. The support for the STI is at 3130 points where all the three moving averages meet. The next critical support on the Trend line is at 2990 points. Then STI would test the 18 March 2011 Lo at 2920 points.
The 5-day Stochastic Momentum and the 14-day Relative Strength Indicator are mid way with more room to move south.
In fact the plateau formation of the STI in May looks like once the support of the three Moving Averages at 3130 points is broken, there could possibly be a very sharp drop to the March Lo at 2920 points – a loss of about 240 points or almost eight per cent. In the past such chart formation always precede some adverse news to come. [Bloomberg on 30 May 2011 quoted Mark Mobius, executive chairman, Temple Asset Management Fund that oversees more than US$50 billion, as saying there would be a more serious financial crisis to come compared to the previous one.]
Fundamental comment
May saw a number of negative news to cause the second liners and third liners to weaken. Most commodity prices including crude oil price and gold price were down more then ten per cent. When commodity prices drop or collapse [A collapse is a drop of more that 20%.] funds would need to liquidate equities to top up their collateral or make up for their loss. Listed Singapore companies doing businesses with the MENA countries [Middle East & North Africa] are reporting the loss of their ventures there. The triple woes in Japan [Earthquakes, tsunami and the Fukushima Daiichi Atomic Power plant explosion] saw a number of Singapore companies affected by the lack of supplies of manufactured goods and services from there. Examples are car parts, computer chips and tourism. Companies are reporting the weakness of the US dollar is making the cost of their companies’ import higher due to inflation and their profits in US dollar convert to SIN dollar lower or even at a loss. Property companies including those doing business in China are reporting slower take up rate in their launches due to the China Government curb on property transactions to bring down inflation. In Singapore after the General Election on 7 May, the pre-election and post-election Prime Minister Lee Hsien Loong promised to look into the electorate’s grievances including the runaway property prices beyond the reach of most heartlanders who want to start their new homes. A new minister, Khaw Boon Wan was posted to the National Development Ministry to help bring down the prices of public housing. This in turn has an effect to stop, at least temporary, the runaway prices of private housing. Share prices of most listed property companies showed weakness.
Last but not least, there has been worldwide media reporting of some red-chips in the US or S-stock in Singapore [Chinese companies doing business in China, registered in tax haven islands that do not have extradition treaties and listed in US or in Singapore.] blatantly falsifying their accounts which even hoodwinked reputable audit firms like Deloitte and Price Waterhouse, to show ridiculous business turnover or contracts, to show questionable profits and untrue bank cash balances with the help of greedy branch bank managers. It was only when research analysts went on site to check the businesses of these fraudulent companies and sometimes revelations by whistle-blowers that brought the attention of auditors to do more thorough checks with headquarters of banks that resulted in exposing these fraud companies. Too late!
In US the red chip, Longtop was traded up to the Hi of US$18.93. Now it is worthless. In Singapore worthless S-stocks recorded up to thirty percent of the about one hundred and forty S-stock listed here. In US and in Singapore fraud in Chinese companies are not new. Sinwah news agency, the official Chinese news publication, reported all the seventeen Chinese shipyard companies, majority owned by the China State Owned Enterprises [SOE] were involved in fraud accounting. Cosco Corporation in China, also a SOE and parent of the Cosco Singapore was also involved in fraud accounting detected by the China Audit Committee.
Cosco Singapore informed the Singapore Exchange that what the parent company, Cosco Corporation, China committed, has nothing to do with Singapore Cosco. Share price of Cosco Singapore dipped from $2.09 to $1.91 within three days. Investors are now wary of S-stocks although there are a few S-stocks with good fundamentals.
With some of the negative news mentioned earlier and more to come, June should continue to be in down trend – hopefully not a sudden collapse of more than 240 points as mentioned in the Technical Comment.
Come June the Singapore Stock Market would still be depressing unless daily traded volumes are above 1.6 billion shares or $1.6 billion for five days in a row. Up to the last week of May from April there were net outflow of funds from Singapore and most Asian markets as reported by CitiGroup Research. Funds go where there is volatility in commodity or equity or money markets. Funds may also park their capital in bonds when there are uncertainties in political and social order in a country and in uncontrolled fraudulent companies in the equity markets. Compared to other Asia markets, Singapore has an added disadvantage of being small in most of her listed companies in way of market capitalization.
Hopefully after June there may be some positive factors in Singapore for funds or market operators to be interested in the Singapore stock market. A seminar on the Stock Market Outlook for 2H11 on Sunday, 26 June 2011 – 2.00 pm to 5.30 pm should be able to guide readers on the market outlook from June to December and strategies to use.
This article ends the series of “Taking Stock on current month. Onward the following month”.
Source/转贴/Extract/: www.sharesinv.com
Publish date:31/05/11
Taking Stock of May 2011. Onward June.
By Charlie Lau Suan Liat
Technical comment
The Straits Times Index [STI] closed May 31 2011, 3160 points, down 20 points from April 29 [Closed: 3180 points]. Most market favorite second liner stocks in the 30 Straits Times Index components were down except for some heavyweights, bank stocks and some illiquid ones like Jardine C&C, Jardine Strategic and Jardine Matheson. Second & third liners in the general market were mostly down true to the jingle, “Sell in May & go away”.
May saw some stocks – market favorites, commodity stocks and S-stocks down from end April and should be testing new Lo in June. The support for the STI is at 3130 points where all the three moving averages meet. The next critical support on the Trend line is at 2990 points. Then STI would test the 18 March 2011 Lo at 2920 points.
The 5-day Stochastic Momentum and the 14-day Relative Strength Indicator are mid way with more room to move south.
In fact the plateau formation of the STI in May looks like once the support of the three Moving Averages at 3130 points is broken, there could possibly be a very sharp drop to the March Lo at 2920 points – a loss of about 240 points or almost eight per cent. In the past such chart formation always precede some adverse news to come. [Bloomberg on 30 May 2011 quoted Mark Mobius, executive chairman, Temple Asset Management Fund that oversees more than US$50 billion, as saying there would be a more serious financial crisis to come compared to the previous one.]
Fundamental comment
May saw a number of negative news to cause the second liners and third liners to weaken. Most commodity prices including crude oil price and gold price were down more then ten per cent. When commodity prices drop or collapse [A collapse is a drop of more that 20%.] funds would need to liquidate equities to top up their collateral or make up for their loss. Listed Singapore companies doing businesses with the MENA countries [Middle East & North Africa] are reporting the loss of their ventures there. The triple woes in Japan [Earthquakes, tsunami and the Fukushima Daiichi Atomic Power plant explosion] saw a number of Singapore companies affected by the lack of supplies of manufactured goods and services from there. Examples are car parts, computer chips and tourism. Companies are reporting the weakness of the US dollar is making the cost of their companies’ import higher due to inflation and their profits in US dollar convert to SIN dollar lower or even at a loss. Property companies including those doing business in China are reporting slower take up rate in their launches due to the China Government curb on property transactions to bring down inflation. In Singapore after the General Election on 7 May, the pre-election and post-election Prime Minister Lee Hsien Loong promised to look into the electorate’s grievances including the runaway property prices beyond the reach of most heartlanders who want to start their new homes. A new minister, Khaw Boon Wan was posted to the National Development Ministry to help bring down the prices of public housing. This in turn has an effect to stop, at least temporary, the runaway prices of private housing. Share prices of most listed property companies showed weakness.
Last but not least, there has been worldwide media reporting of some red-chips in the US or S-stock in Singapore [Chinese companies doing business in China, registered in tax haven islands that do not have extradition treaties and listed in US or in Singapore.] blatantly falsifying their accounts which even hoodwinked reputable audit firms like Deloitte and Price Waterhouse, to show ridiculous business turnover or contracts, to show questionable profits and untrue bank cash balances with the help of greedy branch bank managers. It was only when research analysts went on site to check the businesses of these fraudulent companies and sometimes revelations by whistle-blowers that brought the attention of auditors to do more thorough checks with headquarters of banks that resulted in exposing these fraud companies. Too late!
In US the red chip, Longtop was traded up to the Hi of US$18.93. Now it is worthless. In Singapore worthless S-stocks recorded up to thirty percent of the about one hundred and forty S-stock listed here. In US and in Singapore fraud in Chinese companies are not new. Sinwah news agency, the official Chinese news publication, reported all the seventeen Chinese shipyard companies, majority owned by the China State Owned Enterprises [SOE] were involved in fraud accounting. Cosco Corporation in China, also a SOE and parent of the Cosco Singapore was also involved in fraud accounting detected by the China Audit Committee.
Cosco Singapore informed the Singapore Exchange that what the parent company, Cosco Corporation, China committed, has nothing to do with Singapore Cosco. Share price of Cosco Singapore dipped from $2.09 to $1.91 within three days. Investors are now wary of S-stocks although there are a few S-stocks with good fundamentals.
With some of the negative news mentioned earlier and more to come, June should continue to be in down trend – hopefully not a sudden collapse of more than 240 points as mentioned in the Technical Comment.
Come June the Singapore Stock Market would still be depressing unless daily traded volumes are above 1.6 billion shares or $1.6 billion for five days in a row. Up to the last week of May from April there were net outflow of funds from Singapore and most Asian markets as reported by CitiGroup Research. Funds go where there is volatility in commodity or equity or money markets. Funds may also park their capital in bonds when there are uncertainties in political and social order in a country and in uncontrolled fraudulent companies in the equity markets. Compared to other Asia markets, Singapore has an added disadvantage of being small in most of her listed companies in way of market capitalization.
Hopefully after June there may be some positive factors in Singapore for funds or market operators to be interested in the Singapore stock market. A seminar on the Stock Market Outlook for 2H11 on Sunday, 26 June 2011 – 2.00 pm to 5.30 pm should be able to guide readers on the market outlook from June to December and strategies to use.
This article ends the series of “Taking Stock on current month. Onward the following month”.
Source/转贴/Extract/: www.sharesinv.com
Publish date:31/05/11
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