AS EXPECTED, Asian markets made gains yesterday following an agreement last Friday between European Union leaders to bail out banks and provide more oversight for the troubled financial sector. Suddenly, a eurozone melt-down does not seem as imminent as it did a week ago.
Still, with the end-of-quarter window-dressing over and done with last week, Monday's gains were somewhat muted.
The Straits Times Index (STI) gained 32.14 points to close at 2,910.59 as blue chips such as Jardine Matheson, Jardine C&C, Keppel Corp and Venture headed up.
Leading the actives was TT International, which plunged 40 per cent, or 4.8 cents, to close at 7.2 cents following news that the rescue deal it had stitched together with Lucrum Capital for its Big Box project at Jurong East had hit a snag. The stock initially plunged to as low as seven cents. The two parties jointly announced last Saturday that the investment framework agreement had "automatically terminated" as certain conditions precedent were not fulfilled. TT International said that it "will continue to explore opportunities with other interested parties to complete the development of the property".
Meanwhile, CapitaMalls Asia edged up 1.5 cents to close at $1.58 after announcing that it had established a $1 billion private equity fund to invest in Chinese shopping malls.
Market insiders said that the mood remained cautious after the Friday agreement on use of eurozone rescue funds from the European Stability Mechanism to recapitalise Spanish banks and buy Italy's sovereign bonds. Germany's Angela Merkel has already run into opposition at home for agreeing to the deal.
"Many questions still remain over timing, funding and gaining consensus from member states," Justin Harper of IG Markets noted. "However, these steps take us further away from the complete collapse of the eurozone that many had been predicting at the height of the crisis."
Analysts also noted a significant rise in share buy-back activity in recent weeks - a sign that insiders see their stocks as being significantly undervalued and oversold. These have ranged from blue chips such as UOB, OCBC, SingTel and Singapore Airlines, to mid-caps such as Indofood Agri, Olam and Hyflux.
CIMB reckons investors should "focus on companies, not timing". It has, as its top stock picks, counters such as CCT, CapitaLand, DBS, Ezion, Global Logistics, Genting HK, Genting Singapore, OUE and Sembcorp Industries.
Meanwhile, with the STI outperforming other Asian markets, increasing numbers of market strategists are calling for more upside for the Singapore benchmark index.
"Though we think that the euro crisis is far from over, we believe the latest EU summit outcome should enable the STI to trade above its -1SD (one standard deviation) forward PE level of 2900," DBS Vickers noted.
"We think that the STI should be able to rise above this level and head for 2,960-3,025 in the coming weeks. However, we expect the move towards 3,000 to be choppy. We are also not expecting it to be the start of a major rising trend; instead the move is likely to shift the index into a higher trading band from 2,900 to 3,025."