A good seven weeks; what about the next seven?
Since beginning of the year, global equity markets started to rallied, brought on by inflow of liquidity, amid concern in the Euro zone. The Straits Times Index (STI) has gone up 14%, with the rally lasting a full 7 weeks. In my opinion, the market is tired of whether Greece will default or not, as the issue has been around for almost two years. The market wants to move ahead and look beyond Greece and is betting that the worst is over (ie, regardless whether Greece defaulted or not, things should improve going forward). The bigger euro economies are the bigger worry, namely Portugal, Italy and Spain.
Back to the Singapore market, the rally has been broad-based with the theme for February focusing on penny stocks and second-liners. However, as fundamental still rules over technical analysis in the long run, some penny stocks had suffered sharp fall after release of their most recent results, confirming that operating environment remain tough and the recent rallies on such counters are purely speculative and overly-optimistic. (Eg, Dyna-Mac, Oceanus, ChinaEnergy, etc).
I, too, had joined in the frenzy, moving in and out quickly. I do not hold any such penny stocks now, except for one counter, Thakral Corporation (visit SGX website to find out more about the company). The company is in consumer electronics distribution business (headquartered in Shanghai, China) as well as strategic property and equity investments. Not that I am bullish on this counter in the long-term, but the price had not really move up much as compared to the rest of the penny stocks when I bought into such counters; and furthermore, there was no nasty surprise in their recent results. In fact, with the dividend yield at about 7% and the low share price, I don't see the need to cash out my holdings at this point.
With reporting season coming to an end, the market should again, focus on the Europe's development. Recent strong economic date from the US is keeping the global markets hopeful and so far, STI seems to be in consolidation mode, with occasionally push above 3000 level. Based on technical analysis, for any significant upside, the STI need to close the gap of between 3026 and 3107, which is the 'gap-down' created during the market sell-off in Aug 2011.
Weekly chart - STI (1998-2012)
Stocks on my radar
I am also as hopeful as the market, but will stay prudent and selective on stocks. Stocks that had gone up in-line with the STI and is near to the Jul/Aug peak last year, I prefer to take profit or avoid going into them now. Instead, I am focusing on laggards and recovery plays - stocks that lagged behind the recent rally and also those that had not done well for the past 1-2 years but are expected to recover this year. Past 1 week, I have bought into the following stocks on price pullback: CapMallAsia, OUE, China Minzhong, Swiberand Noble, just to name a few. Others on my radar which I am considering includeTiger Airway and Ezion, which I am hoping to get at lower prices.
