PENNY stocks continued their return to form yesterday when 2.7 billion units were traded, though the low dollar value of $1.03 billion excluding foreign currency stocks and the average value traded of 38 cents per unit suggested churning and rotational punting more than anything else.
Leading the way was GSH Corp - formerly known as JEL Corp - which led the last penny stock rally in May. GSH yesterday added 0.2 cent at 9.4 cents with 463 million shares traded. Others that were stirred into life included TT International, NexGen Satellite Com and HLH.
Blue chips, in the meantime, sank with the Straits Times Index (STI) losing 17.27 points at 2,972.04. As always, the index tracked Hong Kong's Hang Seng Index first, followed by Europe's opening. The Hang Seng dropped sharply and European markets opened in the red.
There was a sense that because the STI has held up well in the face of increasing bad news from the West, stocks here might be benefiting from a "safe haven" play. Lending some support to this thesis has been the Sing dollar's strong showing against the region's currencies over the past few weeks. Brokers also noted the resilience of the Reits (real estate investment trusts) sector in recent months.
In the property sector, CapitaLand slipped one cent to $2.92 on volume of 5.9 million shares. In its daily report, Macquarie Warrants (MW) said that Macquarie Equities Research (MER) has an "outperform" on CapitaLand. "While the transactions will have no change to earnings estimates, the surplus from the residential component could add 2.41 cents to MER's current residual net asset value (RNAV) of $4.72," said MW. "MER maintains its 'outperform' rating on CapitaLand and its 12-month target price $3.77."
In its July 11 Economics Outlook titled "Jekyll and Hyde economy", Maybank Kim Eng (MKE) said recent measures announced at the Euro Area Summit (June 28-29) provided some respite to the eurozone crisis.
"However, given the underlying fiscal sustainability issue, full resolution of the crisis most likely requires a credible roadmap for greater integration or union," said MKE. "Until then, the eurozone crisis is expected to remain in its 'on-and-off' mode which will contribute to and sustain the fluid and volatile global macroeconomic conditions."
On the subject of Wall Street and the possibility of a third round of "quantitative easing" or QE3, ABN Amro said a reading of the June Open Market Committee meeting minutes shows that QE3 is not a done deal and that the bar for further asset purchases is relatively high. It added that August's meeting is too early to expect any stimulus measures.
In its Global Recovery Dashboard yesterday, DBS Group Research pointed out that in the US, auto sales had been propping up the growth numbers. "It's amazing that nobody at the Fed took autos out of the picture because if you do you see immediately ... that the US economy was never accelerating last year like everyone thought," said DBS.
"It ran at a 2 per cent rate in 2Q, 3Q and 4Q of 2011, before fading a bit more in the first quarter of this year. Underlying (ex-autos) growth should remain at about 1.3 to 1.4 per cent in the second quarter, somewhat better than expected headline growth of 1 per cent."