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TAKING STOCK: STI ends bumpy ride just 51 points down

DBS, SingTel and SIA lead recovery in afternoon as rumours of US rate cut spread

INVESTORS are grateful for small mercies these days – and they got one yesterday when the local market salvaged some respect after another wild day across the region.

The 50.6-point fall in the Straits Times Index (STI) would have been welcome relief after a week that began with the bourse plunging 187.1 points, its worst day since 1987’s Black Monday.

It looked like yesterday would bring a similar amount of bloodletting, with investors bracing themselves for a battering.

The white-knuckle ride began with the STI moving up gingerly in the morning session. But it remained volatile, with gains being made and given up before a further decline as lunch neared.

The pace picked up after the break, when the STI fell swiftly to a low of 2,746.73, enough to get investors holding tight to the edge of their seats.

Just as it seemed as if the market was in a free fall, however, it swooped back up to 2,845.6 points just before 3pm. The index lingered there briefly, but by 4pm, it was was down to 2,757.57 before a hectic final five minutes.

From there, the STI went north to end at 2,866.55, its high point for the day.

While the market fell mainly due to margin calls on hedge funds, there were probably players out there also short-selling stocks as they expected the counters to fall further.

But with rumours of a United States interest rate cut making the rounds late in the afternoon – which turned out to be true last night – investors might have started thinking twice about short-selling and instead bought back stocks that had been oversold.

The V-shaped recovery was led by a few key stocks.

DBS Group Holdings, which had crashed to $16.40, its lowest since March 2006, staged a recovery of such proportions that it ended unchanged with a hefty 17.2 million shares traded.

SingTel helped to prop up the index by ending seven cents higher at $3.65, despite sinking to an intra-day low of $3.30.

Singapore Airlines (SIA) also did its part, rising 36 cents to $15.28 after falling to $14.30 in the afternoon.

Around 5.39 million shares were traded.

OCBC Bank, with 18.8 million shares traded, kept its nose above the water as it ended two cents up at $7.40.

CapitaLand was also two cents higher at $5.42, while CapitaMall Trust was one cent stronger at $2.66.

Palm oil giant Wilmar International dragged the index down, losing 58 cents to close at $3.67 with 21 million shares changing hands.

Another loser was Yanlord Land Group, which was 39 cents lower when it closed at $2.23.

Shipping favourite Cosco Corp had another bad day, sinking 48 cents to $4.15.

NRA Capital managing director Kevin Scully still expects worse to come and advises investors not to take any comfort from the last-minute rebound yesterday as a sign that the market has bottomed out.

He said the recovery was more likely to be the result of short covering and added: ‘We expect more margin calls and more redemption selling.’

Mr Scully sees the 2,800-point mark as an important support level for the STI. If market sentiment worsens, or US recession fears take deeper root, the STI could plunge far more.

Amfraser Securities senior vice-president of research Najeeb Jarhom said the next major support level, after the 3,000-point mark had been breached, is now 2,600 points.

He said: ‘If this leads to a global financial crisis of the scale of the Asian crisis of 1997-1998, then we could be looking at another protracted fall with the bottom seen not earlier than mid- year or even later.’

 

Source: The Straits Times 23 Jan 08

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