FAQs
When the STI Index rallied more than 80 points two days ago…
By Kevin Scully-Financial Blog  •  February 3, 2009
....nobody asked me if this was the turn.....the most common response was the market appeared irrational !!! Company ChartsNobody asked me if they should jump into the market when the STI Index rose more than 80 points 2 days ago. Today's muted response to the Dow's 200 point overnight gain seems to suggest that the Singapore market was discounting the "Obama package" rally just as investors had a short spurt of euphoria late last year with the Paulson rally. The Singapore rally was led by banks and blue chips like Singapore Telecom which seemed to suggest some long fund accumulation.....but overall market volume was low suggesting that it was not sustainable. Let's just look at what is in the news worldwide and even in Singapore over the last few days. The IMF has cut world GDP growth from 2.2% to 0.5% for 2009. The earlier forecast was on the assumption that Brasil, China and India could counter balance the negative growth in the US, EU and Japan. That is clearly not true and at the Davos meeting, China's Premier Wen seems to suggest that China will be desperately trying to keep GDP growth above 8% in 2009 to avoid social unrest. We are now seeing Q4-2008 results with most companies reporting huge losses and announcing huge layoffs and plant shutdowns. We are now looking at 53mn layoffs worldwide in 2009. Singapore is now looking to make sure that local layoffs will not exceed 29,000 - I remember reading a very bullish article forecasting layoffs in Q1-2009 of 2000-3000 which I thought wasnt logical or realistic. Let's get back to basics, banks offer cyclical exposure to economies. With the Singapore economy moving further into recession in 2009 and with rising job losses, corporate failures and declining capital values - banks are likely to see their earnings being hit from all angles, lower business, lower margins and higher provisions both general and specific. As such, it is going to be very difficult for them to perform in an economic downturn which means that the STI Index should trend lower. SIA's recent announcement on flight cuts especially for business class loaded routes, tells us that tourist travel is on the way down. This should be a warning to hotel and tourist plays which rely on foreign visitor traffic to sustain their revenue....dont be surprised if their earnings are impacted by lower occupancies, lower yields and currency translation losses. So another Bear rally in my opinion - so stay away unless you are prepared to trade the ranges. On the Budget, the S$300 cash grant per worker paid three months in arrears is not enough. The CEO of a listed electronics company which had axed some staff told me that if he knew about the grant it would probably at best have reduced the redundacies they had made by 5%. They have even forced staff to work a 4 day week to cut costs. I think the S$300 cash grant is innovative and while bearing in mind that its not enough - it could be tweaked to say S$500 per worker if its a Singaporean and S$300 per worker if its a PR or work permit holder who has been here for say more than 1.5 years. This will mean the potential saving of more jobs of Singaporeans. I am still waiting for my landlord - Cit y Developments to tell us how much of the 40% property tax rebate is being given to tenants in the form of lower rentals.... Source: NRA Capital - Kevin’s Blog
Read the full article
By Kevin Scully-Financial Blog
Kevin began his working life in the regional and economics division of the Ministry of Foreign Affairs. He then moved to the private sector analyzing equities before venturing out to start NRA Capital. After 25 years of watching stocks and living through financial disarray during the Pan Electric Crisis, the 1987 Crash, the Barings debacle, the Gulf War, Asian financial crisis - what can sub-prime do but add another scar to already bruised wounds. Ever since starting his blog, Kevin has been enthusiastically giving his personal views on the market. He discusses about equities, the market turmoil, and the broad economy.
LEAVE A COMMENT
LEAVE A COMMENT

Your email address will not be published.

*

Your Email Address will not be published
*

Read More Articles
More from thefinance