Straits Times Index   

STI

Dow is now down 65 points.

 

Straits Times Index <.STI> down 0.61 percent.

SHIP AND RIG BUILDERS DOWN ON FX LOSS FEARS

Shares of ship and rig builders such as Cosco Corp and Yangzijiang Shipbuilding tumbled as investors feared more unannounced forex losses in the offshore and marine sector, dealers said.

In the past week, two companies, Labroy Marine and SembCorp Marine said they incurred large forex losses stemming from the US dollar's decline against most currencies.

Labroy said on Monday it has an unrealised forex loss of S$208.9 million due to currency hedging. SembMarine said last week that its finance executive undertook "unauthorised" foreign exchange transactions that could lead to a loss of $165 million.

[ID:nSIN101930] "The market is working on a hunch that there could be more (offshore and marine) companies out there that have these forex losses and this fear is just enveloping the market," said a local dealer.

Cosco Corp was down 3.8 percent to S$7.6 with 2.4 million shares traded. Yangzijiang fell 2.6 percent to S$2.59.

Yangzijiang was the most actively traded counter on the Singapore bourse with 96 million shares traded, including a "married", or off-exchange, deal of nearly 81 million shares at S$2.58.

Keppel Corp was also 1.36 percent lower to S$14.50 with 1.5 million shares traded.

ASL Marine fell 2.6 percent to S$1.87 with 540,000 shares traded.

 

Asian stocks, dollar pause as Fed meeting looms

Asian stocks edged lower on Tuesday and the dollar hovered above a record low against a basket of major currencies as investors held their fire ahead of a U.S. Federal Reserve policy-setting meeting that is expected to cut interest rates.

Crude oil prices also eased following a four-day rally to a record high of $93.80 a barrel and gold <XAU=> retreated from a 28-year peak of $794.40 an ounce as its five-day run sputtered to a halt.

Due to kick off later in the day, the two-day Fed meeting is widely expected to conclude with another cut to the 4.75 percent fed funds rate as the U.S. central bank tries to stave off economic fallout from a housing slump and credit market problems.

At the September meeting, the Fed slashed interest rates by a bold 50 basis points, setting alight global stock markets.

"The move this time would be mainly symbolic, with the Fed wanting to show it's prepared to respond to any problems, rather than flooding the market with cash," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

"This would also give them the leeway for another cut later on if it's needed."

By 0205 GMT, Tokyo's Nikkei (.N225: Quote, Profile, Research) had eased 0.7 percent, reversing Monday's 1.2 percent rise, while MSCI's measure of other Asia Pacific stocks slipped 0.4 percent.

On Monday, the MSCI index climbed 2.5 percent to a second straight record closing high, bringing total gains this year to 48 percent -- more than triple the gains for MSCI's main world equity index.

EARNINGS EYED

Investors punished firms that had disappointed in their earnings outlook, sending microchip tester maker Advantest Corp (6857.T: Quote, Profile, Research) down a further 3.4 percent, after Monday's near 7-percent tumble sparked by its profit outlook cut.

Kookmin Bank (060000.KS: Quote, Profile, Research) also fell 3.4 percent a day after the South Korean lender forecast a tough year ahead and a squeeze on margins, while Seiko Epson (6724.T: Quote, Profile, Research) dropped 6.0 percent after it slashed its profit forecast for the year to March 2008.

Resource stocks in the region, which have gained strongly in recent sessions on the back of rallying commodity prices led by oil, were mostly softer.

Mining giant BHP Billiton (BHP.AX: Quote, Profile, Research) eased 0.3 percent, Australia's oil and gas producer Woodside Petroleum (WPL.AX: Quote, Profile, Research) shed 1.5 percent, top zinc refiner Korea Zinc (010130.KS: Quote, Profile, Research) slipped 2.1 percent and gold miner Newcrest Mining (NCM.AX: Quote, Profile, Research) fell 2.1 percent.

U.S. crude lost 80 cents to $92.75, while gold slipped to about $786 an ounce.

DOLLAR STEADIER

After five straight sessions of declines, the dollar found a steadier footing. The dollar's trade-weighted index against six major currencies (.DXY: Quote, Profile, Research) edged up 0.1 percent to 76.925, off Monday's trough of 76.777 -- the lowest in the index's more than 30-year history.

The euro bought about $1.44, retreating from a peak near $1.4440, and 164.80 yen, off Monday's high at about 165.50 yen.

Against the Japanese unit, the dollar fetched 114.48 yen, slightly below late New York levels.

"With the market seeing a 25 basis point rate cut by the Fed this week as a done deal, players feel comfortable selling the dollar," said a trader at a big Japanese bank.

Safe-haven government bonds were little changed ahead of the Fed meeting, with the yield on the benchmark Japanese 10-year bonds up just half a tick at 1.61 percent.

 

STOCKS NEWS ASIA-Rally pauses as Fed meeting looms

Asian stocks took a breather on Tuesday as investors cashed in on gains ahead of the U.S. Federal Reserve policy-setting meeting.

The two-day meeting kicks off later in the day and the Fed is widely expected to cut its target funds rate by at least 25 basis points to 4.5 percent, taking out further insurance against the U.S. housing slump and credit market problems.

At the September meeting, the Fed slashed interest rates by a bold 50 basis points, setting alight global stock markets.

 

"The move this time would be mainly symbolic, with the Fed wanting to show it's prepared to respond to any problems, rather than flooding the market with cash," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

"This would also give them the leeway for another cut later on if it's needed."

By 0028 GMT, Tokyo's Nikkei <.N225> had eased 0.5 percent, reversing nearly half of Monday's 1.2 percent rise, while MSCI's measure of other Asia Pacific stocks <.MIAPJ0000PUS> slipped 0.2 percent.

On Monday, the MSCI index climbed 2.5 percent to a record closing high, bringing total gains this year to 48 percent -- more than triple the gains for MSCI's main world equity index <.MIWD00000PUS>.

 

DOW up by 63.56. STI should be moving up today as well...

 

Quotes:

October 29, 2007, 5.00 pm (Singapore time)

Last updated 6.28pm

S'pore shares close 1.3% higher The Straits Times Index gained 48.23 points to 3,819.78 on volume of 2.64 billion shares valued at $3.16 billion (US$2.16 billion). Risers outnumbered decliners 533 to 284, with 856 issues unchanged. 'Investors are looking at the (possibility of US interest rate cuts) but corporate results have also been quite good, providing firm support,' said Chan Wai Chee, research head at Phillip Securities. 'Earnings are good, and the money supply growing at double-digits for some time now will continue to support future earnings.' Southeast Asia's biggest bank, DBS Group, rose 30 cents to $22.30, United Overseas Bank was up 40 cents to $22.00 and Oversea-Chinese Banking Corp was flat at $9.10. Singapore Airlines fell 10 cents to $19.70 and Singapore Telecom dipped eight cents to $4.08. Keppel Corp rose 20 cents to $14.70. Among the property stocks, CapitaLand advanced five cents to $8.10, Keppel Land was steady at $8.35 and City Developments eased 50 cents to $15.80.   SINGAPORE - Singapore share prices closed 1.3 per cent higher on Monday as investors cheered strong corporate earnings for the third quarter, dealers said.

 

 

Volumes are improving on the stock market. A good sign.

 

In a earlier post, I mentiond that commodities is a key investment theme. Today certainly belongs to the commodities.

Despite past bearish TA signals when it was below $2, Noble Group is up 15c now to $2.48.

 

 

 

 

Competitive devaluation of global paper currencies will lead to inflation.

Bull all the way till july 2008 -read inrternet news-Larry williams quoted by Paul Shread the eminent chartist  dated 24/10/07-he suggests buying on 31/10/07 as 2 more rate cuts are expected.

 

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Quotes: Enter the mature bull - and higher volatility

STOCK investors need pretty strong nerves to stay invested in the market of late. It is not uncommon to see the Straits Times Index (STI) open up 50 points but end the day at -50. And a 100-point plunge in one day may be followed by a similar jump the next. This is a sign that investors are jittery. On the one hand, equities around the world have done spectacularly well in the last four-and-a-half years. During that time, the STI has more than tripled. That's a lot of profits to lock up. On the other hand, there are just as many compelling reasons to hold on to, as there are to quit, equities now. The economic force that the emergence of China and India unleashes into the world, as hundreds of millions of new consumers flood the marketplace in the next few years or decades, is unimaginable. Meanwhile, the wealth accumulated thus far in these two countries is scouring the world for viable investments. That liquidity flow will continue to support asset prices globally.

On the flipside, the economy in the United States - still the world's biggest market today - is slowing down. The impact of the sub-prime mortgage crisis on consumer spending is still a big question mark. If US consumers tighten their purse-strings as they see their home prices fall, then many of the exporters around the world will be hit by declining profits. Demand from Asia may not yet be enough to make up for the shortfall. But increasingly, the market wisdom is that problems in the US are not severe enough to cause a recession there, and hence the impact on the global economy may not be as great as initially feared.

Still, the increased volatility is symptomatic of a maturing bull market.

Four-phase cycle

In a report this month, Citigroup Global Markets' equity research said that the global equity bull market that began in March 2003 is maturing, but not finished yet. We are now into the third phase of a four-phase market cycle, according to Citi.

The first phase is when the economy is emerging from a recession. It follows the bottom of the credit bear market. Spreads fall sharply as companies repair their balance sheets, often through deeply discounted share issues. This, along with continued pressure on profits, keeps equity prices falling.

Phase two begins as profitability turns and equity prices start to rally. Credit spreads fall even further as corporate cashflows rise strongly. This is an immature equity bull market. In the current cycle, this phase began in March 2003.

The third phase is when the credit bull market comes to an end. Spreads start to rise as investor appetite for leverage wanes. The equity market decouples from credit and continues to rise. 'We think that the market is entering this phase now. This is the mature equity bull market,' says Citi.

And after that, the market enters the bear phase, when equity and credit prices are falling together. This is usually associated with falling profits and worsening balance sheets. Insolvencies plague the credit market, and profit warnings plague the equity market. At this stage of the market, a defensive strategy is most appropriate - cash and government bonds are the best-performing asset classes.

Citi tries to identify the four phases in the last 20 years' market cycles. It found that the different phases are not equal in length. For credit market, phase one tends to be fast and furious. It lasted 18 months in 1991-92 and just five months in 2002-03. But the returns are significant - spreads collapsed by 29 basis points (bp) per month in 1991-92 and 50 bp per month in 2001-03.

Phase two tends to be longer. It lasted five years in the mid-1990s and just over four years in the early 2000s. Spreads fell by a more leisurely 3 bp a month in 1992-93 and 10 bp a month in 2001-03.

The credit bear market begins in phase three. Spreads rose by around 300 bp in 1988 and 1997-00. This time round, they have already risen by 120 bp since spreads bottomed on June 12, 2007.

Spreads keep rising in phase four as defaults increase and corporate profits fall. This tends to be the most painful period for credit investors, notes Citi. It lasted 30 months back in 2000-02.

While the credit investor makes money in phases one and two, an equity investor makes money in phases two and three. In phase three in 1988-90, global equities rose by 38 per cent despite a 317 bp increase in credit spreads. And in phase three in 1997-2000, equities rose by 57 per cent despite a 282 bp increase in credit spreads.

While equities perform well in phases two and three, phase two - the immature bull - lasts longer and is less volatile.

For example, the US Vix measure of implied volatility has averaged 15 in phase two and 22 in phase three. This is a key difference between a mature bull and an immature bull. 'The returns may be as good, but the quality of those returns is worse,' says Citi. 'Sharpe ratios and risk-adjusted returns deteriorate.' As for now, the Vix is 16 - having peaked at 30 in July. 'But we would expect the overall trend to be rising as the mature bull market develops.'

This suggests that while it is still right to be overweight equities in phase three, the overweight should not be as great as during phase two. And a leveraged strategy is less appropriate as volatility rises.

Among the sectors, Citi's analysis showed that travel and leisure, retail, media and industrial goods and services performed well in phase three of the last two cycles. Banks underperformed during this phase as credit spreads rose.

Meanwhile, the mature bull phases are also when major bubbles develop. In 1990, Japan rose to a 60 times trailing earnings multiple and accounted for 50 per cent of total global market cap. It now accounts for only 10 per cent. In 2000, technology, media and telecoms (TMT) also rose to 60 times PE and accounted for 40 per cent of global market cap. It now makes up 20 per cent of global market cap.

'These bubbles usually build on a theme that has already been performing strongly through phase two. Into phase three, easier monetary policy and rising capital inflows from other asset classes provide the fuel to drive prices to spectacular and ultimately unsustainable levels. This then bursts and proves a major downward force on global equities in the bear phase four,' says Citi.

Next equity bubble

The next equity bubble could be building in emerging market or commodity plays. 'These are stocks or markets which are perceived to be most positively exposed to a robust global economy, irrespective of the US slowdown.'

However, the Asia ex-Japan index, at 19 times PE, although a premium to the MSCI World's PE of 16 times, is still a long way off the 50-plus times multiple more typical of the peak in these mature bull market bubbles.

'The key point is that if the bubble for this cycle is to be created in the global growth trade, and the Asia Pacific/emerging markets indices in particular, then they could have a lot further to go.

'Investors who try to fight the current re-rating of these markets could suffer the same fate as those who tried to fight Japan in the 1980s and TMT in the 1990s. Probably the right call, but the timing could hit you,' says Citi.

According to Citi, signs of the end of the mature bull run include rate hikes and extended equity valuations. Both don't apply now.

So while the recent dislocation in financial markets suggests the end of the credit bull market, it is not the end of the equity bull market. We are entering the mature bull phase, which will still provide decent returns for equity investors. However, it is becoming increasingly unstable. This is the phase where a major speculative bubble typically develops in the global equity market. Perhaps this time round, it is in emerging markets and commodity plays. However investors should remember that these bubbles can go a lot further than anybody expects - it can prove fatal to bet against them too early, cautions Citi.

The writer is a CFA charterholder. She can be reached at hooiling@sph.com.sg

 

29-10-2007 12:22:30
UPDATE 1-Singapore CPI on track, economy not overheating-govt



(Updates with quotes) SINGAPORE, Oct 29 (Reuters) - Singapore's Trade Minister Lim Hng Kiang said on Monday the Singapore economy was not at risk of overheating, and that inflation for 2007 will fall between the government's forecast of 1.5 to 2 percent.

"The economy is growing very strongly. There are some supply constraints, and we are taking steps to relieve the supply constraints with regard to manpower and space. So we don't see serious overheating problems," Lim said.

The Singapore government expects the city-state's economy to grow by between 7-8 percent this year, compared to last year's growth of 7.9 percent.

Lim said he was confident that Asian economies could weather an economic slowdown in the United States, which is the region's largest export market.

"In Asia, momentum is still very strong. We are very confident that we would be able to ride through the slowdown in the world economy." Lim said Singapore's trade volume for 2007 was not as strong as the government had hoped, but declined to give further details.

The city-state's non-oil domestic exports in September fell a seasonally adjusted 1.5 percent from August, missing expectations for a marginal rise and ending a four-month series of rising exports as weak electronics shipments failed to pick up.

 

Trading volumes have been on the low for the past weeks, BBs and investors are pretty cautious and sensitive to any news. All sideline and watching, got that feeling STI might end the day flat.

 

Pretty slow, lacklustre day as compared with other parts of the region. I think investors are more cautious, awaiting Fed decision on 31 Oct, while some have scooped enough during last week's correction? Hopefully the kickstart last week of the financial reporting season will soon see more upside and more positive swing on the local bourse.

Look at HSI, full of action!

 

GLOBAL MARKETS-New highs for stocks, oil as dollar struggles


Asian stocks hit a record high on Monday and the dollar plumbed an all-time low versus the euro and a basket of major currencies as investors bet the U.S. Federal Reserve will cut interest rates this week.

A wilting dollar coupled with a brief halt to one-fifth of Mexico's production fired up oil prices, sending U.S. crude above $93 a barrel for the first time. Gold rode on the coat-tails of oil to a 28-year high of $792.60 an ounce and other base metals such as copper also firmed on the weak dollar.

Further lifted by upbeat earnings from firms such as Nissan Motor <7201.T>, Japan's Nikkei average <.N225> climbed 1.6 percent to a one-week high by 0337 GMT, while MSCI's measure of other Asia Pacific stocks <.MIAPJ0000PUS> advanced 1.9 percent.

The MSCI index hit an all-time high of 585.32, surpassing the previous peak of 574.04 set on Friday and has gained more than 45 percent this year -- triple the gains for MSCI's main world equity index <.MIWD00000PUS>.

"A (U.S.) rate cut is already factored in and this is helping to boost the Nikkei," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

Lower U.S. interest rates should boost economic growth in Asia's main export market, and also make equity valuations more attractive.

Among major markets in the region, Hong Kong's Hang Seng Index <.HSI> and South Korea's KOSPI <.KS11> both reached new life highs, while Australia's S&P/ASX 200 index <.AXJO> was a whisker away from its record high set on Oct. 15.

After two straight weeks of losses, Chinese mainland stocks rebounded, pushing the Shanghai Composite Index <.SSEC> over 2 percent higher.

BANKS RISE Markets were led by financial names as investors expected that further rate cuts by the Fed, whose two-day policy-setting meeting kicks off on Tuesday, will help loosen up credit markets that had been kicked hard by the U.S. subprime market woes.

Persistent weakness in the U.S. housing market is expected to spur the Fed to lower rates again after the aggressive 50 basis point cut last month that gave global stocks a boost.

Japan's top lender, Mitsubishi UFJ <8306.T>, jumped 5.5 percent and South Korea's Kookmin Bank <060000.KS>, due to deliver its quarterly results later in the day, gained 4 percent.

Investors also snapped up Nissan Motor, sending the stock up 13 percent, after the automaker posted a surprise gain of 12 percent in quarterly operating profit on Friday, while Australian nickel miner Jubilee Mines surged 40 percent on the back of a $2.8 billion takeover offer from Anglo-Swiss miner Xtrata . [ID:nSYD342738] But Advantest Corp <6857.T> skidded 5.2 percent after the world's largest maker of microchip testers posted a drop in first-half net profit and cut its guidance for this year to below expectations. [ID:nT116459] DOLLAR WILTS Amid expectations of lower U.S. rates, the dollar plumbed new depths against the euro. The dollar index <.DXY>, which measures the greenback's value against a basket of six major currencies, eased 0.2 percent, after earlier touching an all-time low of 76.890.

The euro rose to a high near $1.4415 and also climbed against the Japanese currency to 164.50 yen . The dollar bought 114.14 yen , little changed from late New York levels on Friday.

The low-yielding yen tends to underperform when stock markets rally as it is usually used to fund the purchases of higher-yielding, more risky assets in the popular carry trades.

A barrage of U.S. data this week, including the advanced reading of third-quarter economic growth report, will help determine the fate of the dollar, especially if they turn out surprisingly positive for the U.S. economy.

"All of the dollar negatives are priced in, so we need data and some new factors," said Luke Waddington, head of forex trading at Royal Bank of Scotland in Tokyo.

Safe-haven government bonds struggled as demand for riskier assets grew, causing bond yields to rise.

The benchmark 10-year Japanese government bonds climbed one basis point to a one-week high of 1.625 percent.

The Bank of Japan will also meet this week to discuss monetary policy, but was seen holding the overnight call rate target steady at 0.5 percent.

 

Singapore Hot Stocks-Property stocks fall on govt move



Property counters such as City Developments fell after the government said real estate developers could no longer let home buyers delay payments on the bulk of their property purchases. [ID:nSIN259208] City Developments fell 3.1 percent, Wing Tai Holdings was down 4.4 percent and Allgreen Properties lost 3.9 percent.

"We may see annual double-digit residential price increases come to a halt, or grow at a more gradual pace," said Morgan Stanley analyst Melissa Bon in a note.

0240 GMT - Straits Times Index <.STI> up 0.88 percent.

OSSIA SURGES TO RECORD ON SALE OF UNITS Shares of Ossia International jumped as much as 41.67 percent to a record high of S$0.51 with 600,000 shares traded after the firm said it will sell its Hong Kong units.

Ossia, which manufactures footwear, said in a statement that it will sell 80 percent of its two Hong Kong subsidaries for HK$600 million to a Chinese sportswear retail company. At the Friday close, Ossia had a market cap of US$62 million.

0118 GMT - Straits Times Index <.STI> up 0.52 percent.

 

Major property developers really got hit.

Citydev -$0.60

 

STOCKS NEWS ASIA-Stocks hit fresh peak, eye US rate move



Asian stocks hit a fresh all-time high on Monday, thanks to gains in energy shares such as INPEX Holdings as oil prices pushed deeper into record territory above $92 a barrel in early Asian session.

A weak dollar, which plumbed a life low against the euro and a basket of major currencies <.DXY>, coupled with output disruptions in Nigeria fuelled the rally in oil, sending U.S. crude to $92.43 a barrel for the first time.

Stocks were also lifted by upbeat earnings from firms such as Nissan Motor <7201.T> and expectations that the U.S. Federal Reserve will cut interest rates this week after its two-day meeting, starting on Tuesday.

"There will be upward energy from expectations of a Fed rate cut, which seems virtually assured," said Hiroichi Nishi, general manager of equity market at Nikko Cordial Securities.

At 0024 GMT, Tokyo's Nikkei average <.N225> had climbed 0.9 percent to one-week highs, while MSCI's measure of other Asia Pacific stocks <.MIAPJ0000PUS> rose 0.7 percent.

The MSCI index hit a fresh peak of 577.86, surpassing the previous high of 574.04 set on Friday.

South Korea's key KOSPI <.KS11> gained 1.5 percent to a record high, while Australia's benchmark S&P/ASX 200 index <.AXJO> added 0.8 percent, nearing its life high set on Oct. 15.

Nissan Motor <7201.T> rallied 10.4 percent after it posted a surprise gain of 12 percent in quarterly operating profit on Friday, while Australian nickel miner Jubilee Mines surged 39 percent on the back of a $2.8 billion takeover offer from Anglo-Swiss miner Xtrata . [ID:nSYD342738] Also in favour, energy firms INPEX Holdings <1605.T> rose 2.4 percent and oil and gas producer Woodside Petroleum gained 0.6 percent, thanks to record high oil prices.

But investors were swift to punish Advantest Corp <6857.T>, sending the stock skidding 3.8 percent after the world's largest maker of microchip testers posted a drop in first-half net profit and cut its guidance for this year to below expectations.

[ID:nT116459] On Wall Street, the blue-chip Dow <.DJI> gained nearly 1 percent and the tech-heavy Nasdaq Composite Index <.IXIC> put on almost 2 percent, thanks to upbeat earnings outlook from Microsoft .

 

Ya. Not only major property developers, I guess there will be effects on other related sectors, like material suppliers, banks etc.....

 

This change is going to affect the major property developers on Monday.

Singapore to end delayed home payments scheme

Singapore said late Friday that real estate developers could no longer let home buyers delay payments on the bulk of their property purchases, a move that could douse the rise in housing prices.

Residential property prices in the city state have soared to their highest levels in a decade, fuelled by a strong economy and a supply crunch as well as liberal payment schemes that allow buyers to make a 10 to 20 percent deposit and delay the bulk of payments until a project nears completion.

But Singapore's Urban Redevelopment Authority (URA) said these schemes, introduced in 1997 when the economy was in recession, were no longer necessary.

"In view of the current buoyant property market, the Government has decided to withdraw the deferred payment scheme for the sale of uncompleted private residential and commercial properties with effect from 26 Oct 2007," URA said on its Web site.

Up to 90 percent of buyers in projects by Singapore developers such as City Developments and Keppel Land opt for such payment schemes.

The URA said the move would encourage greater financial prudence among investors by compelling them to seek sufficient funds or adequate bank loans before they commit to buying a property.

According to government figures released earlier on Friday, Singapore private home prices rose 8.3 percent between July and September, or over 21 percent since the start of the year.

Some government leaders have expressed concern that the rapid rise in housing prices could threaten Singapore's competitiveness with rival regional cities such as Hong Kong.

Fewer uncompleted residential units in Singapore were sold in the third quarter versus the previous quarter, reflecting investor unease following the subprime mortgage debt fallout in the United States.

"I think we're at the peak of property prices. If this move doesn't cool property prices, we could see the reintroduction of the capital gains tax to further weed out property speculators," said Song Seng Wun, an economist at CIMB-GK Research.

Analysts said the move could also hit investor sentiment on Singapore property shares <.PROP>, although bigger firms such as CapitaLand were well diversified out of the city state.

"There is still a lot of demand for homes. The underlying market fundamentals are still strong because of robust wage and jobs growth," Ku Swee Yong, director of marketing and business development at consultancy Savills, said.