THE Straits Times Index (STI) had a volatile session yesterday as traders tried to anticipate movements in Western markets ahead of this Sunday's elections in Greece. The outcome was waves of short-selling and short-covering that saw the index drop more than 20 points, regain all of this after lunch, and ending with a net gain of 9.27 at 2,797.08, its second successive rise this week following news over the weekend of a 100 billion euro (S$160.1 billion) bailout of Spain's banks.
The broad market, however, was weak. Excluding warrants, there were 170 falls against 134 rises.
In keeping with the pattern of the past three months, volume excluding foreign currency stocks was a weak 1.7 billion units worth $1.06 billion. However, it was the first time since May 31 that the $1 billion mark was breached.
Among the actives with meaningful contribution to dollar value traded were Noble Group with $74 million, Olam International with $67 million and CapitaLand, with $50 million worth of shares traded.
Within the index, the largest contributions came from the three banks - OCBC's 10-cent rise to $8.45 being the largest at 2.81 points. Jardine Matheson provided the biggest drag, its US$1.09 fall to US$48.91 shaving four points off. In total, rises in the banks added almost eight points to the STI.
Among the index stocks which weakened was Singapore Press Holdings, which fell four cents to $3.76 on volume of 4.2 million. OCBC Investment Research yesterday called a "buy" on SPH with fair value of $4.05, citing the media and property company's resilient retail mall business as a reason. "With group investible funds currently at $0.9 billion as of end-March 2012, we believe there is sufficient capacity for SPH to allocate additional capital into its retail strategy ahead," said the broker.
In its daily commentary yesterday, financial data provider Ideaglobal said that the 100 billion euro bailout of Spain's banks announced over the weekend and which pushed some markets higher on Monday could well be negative for eurozone risk as the programme is likely to trigger renewed selling of Spanish assets.
Ideaglobal cited six reasons for this, among them that previous experience with Greece, Portugal and Ireland suggests that bailouts tend to provoke accelerated selling by foreigners. Also, Spanish banks have been the main buyers of Spanish government bonds, which means that government auctions from now on will be a struggle.
Ideaglobal also said it appears that the market has not fully discounted the worst happening with Greece, in the form of a suspension of the second loan package, a bank run and Greece's exit from the eurozone.
"The bias is that risk-aversion will grow, as medium-term concerns about Spain build and a non-pro EU/IMF Greek government is formed," said Ideaglobal. "Ten-year Spanish yields can reach 6.75 per cent in June then climb to 7.50-7.75 per cent, weaker eurozone equity markets can fall 10 per cent . . ."
In its weekly outlook, OCBC Bank said in its Wealth Weekly yesterday that it stayed cautious because the Greek elections on June 17 remains a big uncertainty, and the problems in Spain and the rest of Europe may not be solved by the Spanish government's weekend announcement that it could seek a bailout of up to 100 billion euros for its battered banking system. "Spain continues to be mired in a deep recession and its unemployment rate of almost 24 per cent is the highest in Europe. These will continue to weigh on Spain's banking system," said OCBC.