PENNY stocks were all the rage yesterday as trading for 2010 first got off to a slow start but picked up as the day wore on. The Straits Times Index, as always, depended on Hong Kong's Hang Seng for direction, thus closing a nett 3.07 points weaker at 2,894.55 when the Hang Seng also closed marginally softer.

 

But it was in penny stocks that the real action was to be found and this was amply reflected in the day's volume - excluding foreign currency issues, some 2.2 billion units worth $1.38 billion were traded for an average unit value of 63 cents.

 

Overall, activity in the broad market was generally momentum driven, with traders hopping onto stocks for which there was volume and momentum buildup. Among the low-priced issues to spring into life were BRC Asia, Ziwo and Abterra. Genting Singapore was once again the market's most active counter when it traded 188 million units and lost one cent at $1.29.

 

In a company update, Goldman Sachs retained its 'sell' on Genting with a sum-of-parts price target of 68 cents. It described Genting as the world's most expensive gaming stock at 16x 2011 estimated EV/EBITDA (enterprise value/earnings before interest, tax, depreciation and amortisation) versus the sector's 5-11x.

 

More brokers issued outlook reports for 2010, among them Nomura which said that it sees this as being a transition year for Singapore as it rebalances to a reality of slower global growth.

 

'Skewed towards the OECD countries, Singapore needs to fine-tune its economic model to capture sustainable growth in the longer term.'

 

Nomura said that it forecasts GDP growth of 5.5 per cent this year, adding that recovery will be slower than in past cycles.

 

DBS-Vickers said in its outlook report that the opening of the casinos, job creation, population growth and Budget expectations will sustain the market's momentum in the first quarter.

 

'Rate hike concerns and peaking of growth momentum could weigh on the market as the first half progresses. Temporary hiccups aside, we believe 2010 is a year where equity markets will gradually grind higher, interspersed with periods of volatility,' said DBSV. It said that heading into 2010, equities are in a 'sweet spot' and set a 12-month STI target of 3,500 based on 16x 2011 earnings.

 

Writing in the Australian Financial Review over the weekend, billionaire hedge fund manager George Soros said that the financial crisis has drawn comparisons with the Great Depression of 80 years ago but the magnitude of the current problem is actually greater than the Great Depression.

 

'In 1929, total credit outstanding in the US was 160 per cent of GDP and it rose to 250 per cent by 1932. In 2008, we started at 365 per cent - and this excludes the pervasive use of derivatives.'

 

Mr Soros said that artificial life support provided by governments has led people to want a quick return to business as usual and to think of 2008's crash as a bad dream.

 

'Unfortunately, the recovery is liable to run out of steam and may even be followed by a second downturn, although I am not sure whether it will occur in 2010 or 2011 . . . the growing belief that the global financial system has escaped collapse and that we are slowly returning to business as usual is a grave misinterpretation. Humpty Dumpty cannot be put together again,' said Mr Soros.