Business Times - 22 Apr 2009
STOCKS
Was Jardine Matheson used to rig the STI?
By R SIVANITHY
SENIOR CORRESPONDENT
GENUINE buying or index manipulation? This is the question traders were asking after the Straits Times Index yesterday jumped more than 30 points in the final few seconds, reversing a loss of 21 points at 5pm to a nett gain of 12.4 points at 1,887.25.
The thinly-traded Jardine Matheson (JM) was identified as the main counter used to push the STI up - the counter sold for US$19.96 at 5pm but ended a nett US$4.16 or 21 per cent higher at US$24 after the post-closing adjustment period at 5.05pm. Only 36 lots were bought in these five minutes, yet JM's rise alone pushed the STI up by 19 points.
Notwithstanding JM's odd movement, judging by the pattern of yesterday's session, traders were clearly betting that Wall Street would stabilise after its 4 per cent selloff on Monday - the Straits Times Index, which has proved to be an excellent front-runner of the US market's performance, first dropped 60 points but had recovered two-thirds of this before the push on JM.
However, the broad market - excluding derivatives and the STI's 13-12 advance-decline score - was weak with just 91 rises and 273 falls.
Analysts appear divided over the outlook for the STI. Citi Investment Research, which until a couple of weeks ago had said that the index would drop to 1,500, in a April 17 Strategy Focus said that its 12-month target is now 2,400 because, based on the latest economic data, the worst is over.
'Market valuations should normalise and recover closer to mean price/book valuations once the economy is out of the recession. Our 2,400 target represents a conservative price/book of 1.47 times, still 0.5 standard deviations below our adjusted 12-month trailing price/book mean of 1.63 times,' said Citi.
It added that the index might pull back to 1,700 but the likelihood of testing the recent low of 1,460 is low, so it would buy the dips.
BCA Research however, said in its April 17 Emerging Markets Strategy that a moderation in the pace of contraction, which is what has been taking place, does not mean imminent recovery and since the risk/reward ratio of global equities is poor, it would not recommend chasing the rally in emerging markets.
'There has been considerable enthusiasm about 'green shoots' in the global economy. While any sign of tentative improvement is worth watching for, we continue to advise caution . . . our view is that the US economy's secular growth at the current juncture is not as rosy as before and the features of the current downtrend are different from all previous recessions in the past 60 years,' said BCA, adding that the main difference was that the banking system was functioning properly in previous recessions.
'Bankruptcies, downsizing and debt restructuring are likely to continue dominating the economic and financial landscape. For us, this means the current US equity rally's staying power is questionable,' said BCA.
Phillip Securities Research earlier this month, in its Q2 outlook, said that although Wall Street was at that time reacting to signs of economic stability, a likely scenario is a selloff once growth disappoints.
It also said that we are experiencing 30 years of global imbalances unwinding and expects the local economy's recovery to be 'L' and possibly 'W' shaped. It expects Q3 growth to be positive but the rebound to be unsustainable, with Q4 growth falling once again into negative territory.
STOCKS
Was Jardine Matheson used to rig the STI?
By R SIVANITHY
SENIOR CORRESPONDENT
GENUINE buying or index manipulation? This is the question traders were asking after the Straits Times Index yesterday jumped more than 30 points in the final few seconds, reversing a loss of 21 points at 5pm to a nett gain of 12.4 points at 1,887.25.
The thinly-traded Jardine Matheson (JM) was identified as the main counter used to push the STI up - the counter sold for US$19.96 at 5pm but ended a nett US$4.16 or 21 per cent higher at US$24 after the post-closing adjustment period at 5.05pm. Only 36 lots were bought in these five minutes, yet JM's rise alone pushed the STI up by 19 points.
Notwithstanding JM's odd movement, judging by the pattern of yesterday's session, traders were clearly betting that Wall Street would stabilise after its 4 per cent selloff on Monday - the Straits Times Index, which has proved to be an excellent front-runner of the US market's performance, first dropped 60 points but had recovered two-thirds of this before the push on JM.
However, the broad market - excluding derivatives and the STI's 13-12 advance-decline score - was weak with just 91 rises and 273 falls.
Analysts appear divided over the outlook for the STI. Citi Investment Research, which until a couple of weeks ago had said that the index would drop to 1,500, in a April 17 Strategy Focus said that its 12-month target is now 2,400 because, based on the latest economic data, the worst is over.
'Market valuations should normalise and recover closer to mean price/book valuations once the economy is out of the recession. Our 2,400 target represents a conservative price/book of 1.47 times, still 0.5 standard deviations below our adjusted 12-month trailing price/book mean of 1.63 times,' said Citi.
It added that the index might pull back to 1,700 but the likelihood of testing the recent low of 1,460 is low, so it would buy the dips.
BCA Research however, said in its April 17 Emerging Markets Strategy that a moderation in the pace of contraction, which is what has been taking place, does not mean imminent recovery and since the risk/reward ratio of global equities is poor, it would not recommend chasing the rally in emerging markets.
'There has been considerable enthusiasm about 'green shoots' in the global economy. While any sign of tentative improvement is worth watching for, we continue to advise caution . . . our view is that the US economy's secular growth at the current juncture is not as rosy as before and the features of the current downtrend are different from all previous recessions in the past 60 years,' said BCA, adding that the main difference was that the banking system was functioning properly in previous recessions.
'Bankruptcies, downsizing and debt restructuring are likely to continue dominating the economic and financial landscape. For us, this means the current US equity rally's staying power is questionable,' said BCA.
Phillip Securities Research earlier this month, in its Q2 outlook, said that although Wall Street was at that time reacting to signs of economic stability, a likely scenario is a selloff once growth disappoints.
It also said that we are experiencing 30 years of global imbalances unwinding and expects the local economy's recovery to be 'L' and possibly 'W' shaped. It expects Q3 growth to be positive but the rebound to be unsustainable, with Q4 growth falling once again into negative territory.
