TRADERS made a spirited attempt at driving the Straits Times Index (STI) up for the second consecutive day yesterday, but their efforts ran into headwinds when Europe opened in the red. As a result, the STI, which at one stage had shot up 22 points, ended with a gain of just 5.22 points at 2,846.82.
Most of the activity in blue chips was said to be in anticipation of either half-year window-dressing today and/or possible bailout announcements by European Union heads of state at their summit that ends today.
Either way, there was heightened participation that made its presence felt in the turnover numbers. Excluding foreign currency issues, 1.6 billion units worth $1.2 billion were traded, up from Wednesday's $1.06 billion. The broad market, however, registered 211 falls against 144 rises, excluding warrants.
Tan Chong International was the day's most active stock by virtue of a 159 million-strong block deal that crossed at HK$2.60 per share. The counter closed up 16 HK cents at HK$2.05.
Among the standout performers in the index were CapitaMall Trust with a five-cent or 2.7 per cent rise to $1.895; Sembcorp Marine, which ended 13 cents higher at $4.70; and Jardine Cycle & Carriage, which rose 87 cents to $46.12.
The biggest drag came from a four-cent drop in telco StarHub to $3.41. DMG & Partners said yesterday that it recently hosted StarHub at its Asean Conference in Singapore where discussions centred on capital management and the 2013-16 Barclays Premier League (BPL) soccer broadcasts.
"There were no major surprises with management reiterating the need to maintain sufficient cash buffer in view of the uncertain industry dynamics," said DMG.
"StarHub's share price has re-rated on yield attraction, but we think further upside may be capped by concerns over margin dilution from the BPL and steep device subsidies. We remain 'neutral' on the stock, but up our fair value to $3.30 from $2.80 after lowering our weighted average cost of capital."
In its June 27 Downunder Daily titled "Growth Scare", Morgan Stanley (MS) said growth was falling short of expectations in most places and earnings expectations in developed markets are still too high.
"Not only is data falling short of forecasts: the slowdown is starting from a lower absolute level of growth ... the developed-economy PMIs (purchasing manager indices) are already signalling contraction in manufacturing ... " said MS.
"While economic data, commodities, and rates flag downside risks to growth, earnings forecasts remain remarkably bullish. For sure, 2012 estimates have been downgraded. But the sell-side consensus expects strong growth next year ... This is very likely to be wrong, in our view. Adam Parker, our US strategist, expects US EPS of US$99, versus consensus of US$118 for 2012. Graham Secker, our European strategist, expects European EPS of US$91 versus consensus of US$111."
As for Wednesday's rise on Wall Street that reportedly was because of positive durable goods and existing home sales reports, DBS Group Research said in its Daily Breakfast Spread that the bar was set low.
"Existing home sales jumped by 5.9 per cent in May over April. That's great but it only just made up for the 5.5 per cent drop the month before. Treading water is good if sinking is the alternative," said DBS.