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Wall St-influenced downtrend continues
Some brokers expect the US and all markets to be quiet ahead of Friday's key US employment figures
By R SIVANITHY
SENIOR CORRESPONDENT
THE downtrend in the local stock market that started roughly a fortnight ago continued yesterday with the Straits Times Index dropping 19.29 points to 2,629.35. Activity was relatively muted as has been the case for several sessions now with direction wholly dictated by expectations of how Wall Street would behave later in the day. That prognosis, based on a fall in Hong Kong, Europe opening roughly 1.3 per cent in the red and a weak showing in the December futures for the Dow Jones Industrial Average, suggested an indifferent-to-weak Thursday for the US market.
 Despite turnover excluding foreign currency issues amounting to a seemingly decent 1.4 billion units worth $1.1 billion, it was in fact a sore point with most dealers who complained of a lack of business amid an exceedingly quiet session. This in turn suggested that the bulk of volume was driven by programme trades and house accounts. Excluding derivatives, there were only 91 rises versus 365 falls.
Possibly the index's worst performer in recent times has been SingTel, which yesterday lost 3 cents at $2.89. The counter which traded at $3.17 two weeks ago, has now fallen 9 per cent since then.
Observers say two factors are possibly responsible - SingTel arguably overpaying for the rights to televise English Premier League football on cable TV and the pressure its Indian associate Bharti has come under in the Indian stock market because of earnings concerns.
Among the reports of interest was Kim Eng's 'hold' on China Hongxing Sports that was also the broker's final recommendation for now.
Describing the 78 per cent plunge in Q3 profit to 23 million renminbi (S$4.7 million) compared to last year as being way below expectations, Kim Eng said the company is now facing the worst combination possible of weak sales and escalating costs.
'There is now much price upside even after factoring in an earnings recovery in FY10 on an 8x earnings multiple. We are ceasing coverage of the stock as we see high risks and a lack in earnings catalysts until 2H 2010,' said Kim Eng. The stock yesterday dropped 1.5 cents to 16.5 cents with 50 million done.
The local broker also issued a 'hold' on Raffles Education after the latter announced a 55 per cent drop in Q1 profit to $14 million that fell short of expectatios and was said to be another test of investors' patience. After lowering its earnings estimates by 30 per cent for the next two years, Kim Eng's new target price for REH is 51 cents, which is 20x FY10 estimated earnings. The counter yesterday lost 3 cents at 43 cents.
Elsewhere, shares of water treatment firm Hyflux finished 9 cents down to $3.03 after the company reported Q3 results that OCBC Investment Research described as 'slightly muted'. The broker also said in view of Hyflux's weaker revenue growth, it has cut its FY09 and FY10 sales estimates by 15.6 per cent and 4.7 per cent respectively.
'But due to the better margins outlook, we have largely kept our earnings estimates unchanged. As we are also pushing out our valuation from 22x blended FY09/FY10 EPS to FY10 EPS, our fair value improves from $3.30 to $3.48. Maintain 'buy',' said OCBC Investment Research.
In its Traders Spectrum yesterday, DBS-Vickers said it expects Wall Street and all markets to be quiet ahead of Friday's key US employment figures.
'A tight range within the 15-day (currently at 2,660) and the 65-day (currently at 2,609) exponential moving average (EMA) is seen in the immediate term with the consolidation trend still intact. There is no change in our technical view that the STI has downside risk to its 200-day EMA near 2,400 before the consolidation trend ends and the major uptrend resumes,' said DBSV.
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