Published January 31, 2009

Market value creeps up in January

Analysts note that the market could still give up these gains in the months ahead when it gets greeted with shaky corporate earnings

By LYNETTE KHOO

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(Singapore)

IF THE adage 'as January goes, so goes the rest of the year' holds true, market values can be expected to finish 2009 flat or slightly higher than 2008.

The combined market value of companies listed on the Singapore Exchange (SGX) climbed to $393.97 billion in January, from $393.04 billion in December 2008.

But analysts say the market could still give up this gain in the months ahead, as shaky corporate earnings come in.

'The increase in market cap is certainly coming from an increase in (share) prices. Unfortunately for February and March, we can't expect much momentum simply because of the corporate earnings season,' said DMG & Partners Securities senior dealing director Gabriel Yap.

This month, which coincided with the start of the Ox year, saw telecom and plantation stocks put on weight.

SingTel's market cap rose 4.3 per cent to $42.34 billion, retaining its top place. StarHub grew 5.2 per cent to $3.49 billion and MobileOne added 9.5 per cent to $1.45 billion.

Analysts note that while telcos' subscriber growth will slow amid a withering economy, the worst of the margin-erosive market competition is over.

Plantation stocks did well on the back of a brief gain in crude palm oil prices earlier this month on talk that bad weather in South America may disrupt crop production.

The market cap of Wilmar International gained 3.9 per cent to $18.52 billion, Golden Agri Resources jumped 31.9 per cent to $3.09 billion and Indofood Agri Resources rose 14.2 per cent to $875.9 million.

Banks played musical chairs again. DBS Group regained its position as the largest local bank and second-largest listed firm by market cap after a 4.8 per cent gain from a month earlier to $20.12 billion in January. UOB slipped three ranks to fifth place during the month, after shedding 8 per cent of its market value to $18.1 billion. OCBC stayed in seventh place after its market cap added 3.2 per cent to $16.1 billion.

Related link: Click here for the market cap of all SGX-listed companies

SGX enjoyed a 2 per cent gain in market cap to $5.54 billion, despite a profit slump in its second quarter ended December 2008. Analysts have differed in their views on the stock, issuing 'buy' and 'sell' calls.

On the other hand, property, offshore marine and media stocks were counted among losers in market cap.

CapitaLand's market value slumped 22.8 per cent to $6.78 billion, City Developments slipped 11 per cent to $5.16 billion and UOL lost 11.7 per cent to $1.56 billion as the market priced in expectations of more provisions or write-downs.

Shipbuilders were also hit, by recent news of contract terminations or reviews by clients and threat of more order cancellations. Keppel Corp's market cap fell 6.5 per cent to $6.45 billion, Sembcorp Marine slid 5.4 per cent to $3.29 billion and Cosco Corp lost 16.8 per cent to $1.77 billion.

Some defensives failed to hold. ST Engineering's market value dipped 3.8 per cent to $6.84 billion and SPH's market cap declined 9.6 per cent to $4.48 billion. The latter's net profit for the first quarter ended Nov 30, 2008 took a hit, falling 34.8 per cent to $73 million, after investment losses on its portfolio.

Analysts say market confidence is still lacking.

'Next month, corporate earnings will be bad, and in the coming six months, economic news flow will be bad. In such a climate, I don't think confidence will return,' CIMB-GK research head Kenneth Ng said. 'We expect the STI to re-test the October's low of 1,500 and possibly break it in the first six months.'

On corporate earnings, Mr Ng said there is room for disappointment as a lot of S-chips are going to announce poor results. There are also risks of property write-downs and banks could post more investment losses or make provisions on bad loans.

CIMB-GK is 'overweight' on SingTel, M1, SPH and real estate investment trusts such as Ascendas Reit and CapitaCommercial Trust. It is 'underweight' on banks, property and offshore and marine stocks.

'We are more comfortable to be positive on the market by the middle of the year,' Mr Ng said.

DMG's Mr Yap expects sideways consolidation to linger until the end of the third quarter. 'If this trading range holds, which was seen after the 1973 oil market crisis and the 1985 recession, then it will set the foundation for the next up-move,' he said.

But for a market recovery to be sustainable, banks need to start lending again, metal prices - particularly copper - have to recover as they are leading indicators of world demand, and a recovery in earnings growth has to hold out.

'By October, after at least two to three quarters of very bad earnings, there is a possibility that corporate earnings will at least be able to climb quarter-on-quarter,' Mr Yap said.