ACTIVITY swung away from micro- caps and into larger stocks yesterday, judging by the volume numbers. Excluding foreign currency counters, 2.4 billion units worth $1.5 billion were traded giving an average of 63 cents per unit, the highest in several weeks. For most of last week, average unit value was under 20 cents.

Price plunges

A large part of volume came from the heavy selling of Wilmar International, following news that net profit for 2011 fell 34 per cent. Wilmar's shares crashed 43 cents or 9 per cent to end at $4.27, on volume of 63 million. The plunge cut almost 13 points off the Straits Times Index, the latter enjoying a spot of short-covering stability after Wednesday's 31-point loss to end a net 2.69 points higher at 2,903.60. The broad market excluding derivatives was weak and recorded 146 rises against 253 falls.

This time, the resurgence of European sovereign debt worries because of election results in Greece and France has meant blue chips are back in the frame, albeit towards the downside. The Straits Times Index, which the bulls a little over a week hoped would pierce the 3,000 level on the upside, yesterday dropped to an intraday low of 2,887. Instead of upside resistances, traders are now looking at downside supports.

Among the index stocks to suffer was Singapore Airlines, whose shares plunged 30 cents to $10.29 after it reported a shock Q4 loss.

In the China segment, shipbuilder Cosco Corp ended 1.5 cents lower at 95.5 cents with 4.6 million traded.

In its May 8 "sell" on Cosco, Citi Investment Research wrote of unrelenting margin pressure, a glut of shipbuilding capacity in China and stagnant offshore gross margins.

"We maintain our 'sell' recommendation and reduce earnings by 20-27 per cent over FY12-14E on the back of weaker than expected earnings and lackluster recovery across all segments," said Citi.

"Our net profit forecast now assume earnings to decline 34 per cent year-on-year in 2012E to reach $92 million and bottom at $80 million-$83 million in 2013-14E. Cosco faces multiple challenges ahead; inability to capitalise profitably from its growing offshore orderbook and severe headwinds in ship repair as well as newbuilding. We revise our target price down to $0.70 accordingly."

Among other brokers, JP Morgan said it is "neutral" on Cosco with a $1 target, Deutsche Bank said current valuations are fair and so rated the stock a "hold" with a $1.10 target, and UBS Investment Research issued a "sell" with a 58 cents target.

In its May 9 Asia Macro Debates, Morgan Stanley (MS) said although it is bullish on Asia ex-Japan equities, it continues to believe Singapore's valuations should trade below its historical average due to a combination of lower expected earnings per share growth in 2011-13 than in 2002-11 and increased growth volatility due to rising developed market growth volatility.

"Contrary to investor perception, we believe that Singapore's valuations are unattractive and are unlikely to re-rate from here," said MS. "MSCI Singapore PE is at a 20.7 per cent premium to MSCI EAFE, which is 14.5 per cent higher than its 10-year average. Singapore is our least preferred market within Asean 3."

The MSCI EAFE is an index that tracks Europe, Australasia and the Far East, and is designed to track the performance of developed markets outside of the US and Canada.