Published February 28, 2009

Bears call the tune in February

Banks, property counters, Reits and S-chips the hardest hit as market capitalisation of SGX stocks declines 6.7pc in Feb

By LYNETTE KHOO

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BEARS called the tune again in February, bringing market caps down further as the earnings reporting season unveiled more casualties of the economic downturn.

The combined market capitalisation of Singapore listed companies fell 6.7 per cent from January to $367.4 billion. The hardest-hit were the banks, property developers, real estate investment trusts (S-Reits) and China-based companies listed here (S-chips).

'It is difficult to see how equities can truly rally in the first half as earnings contract,' said CIMB-GK research head Kenneth Ng in a report.

Property developers, many of which announced fair value losses on investment properties, writedowns on development properties and slower sales, saw erosion in their market values in February.

Among them, City Developments' market cap fell 15.3 per cent to $4.36 billion and Keppel Land's dipped 7.1 per cent to $937.5 million. CapitaLand bucked the trend in the industry, with a 23.8 per cent jump in market cap to $8.39 billion, as the market warmed up to its $1.84 billion rights issue that opened on Thursday.

The S-Reits also battled with value erosion, gripped by market fears of refinancing difficulties and debt rollover.

Kim Eng technical analyst Ken Tai noted that the market was particularly negative on Reits that issued units in place of cash as dividends. 'It's a very polite way to tell investors that they may not have enough cash at hand,' he said.

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

CapitaCommercial Trust's market value fell 20.8 per cent to $1.06 billion, Suntec Reit's shed 12.9 per cent to $907.8 million and Ascott Reit slid 35.7 per cent to $219.9 million.

CDL Hospitality Trust, which said that it will reduce its distribution from 100 per cent to 90 per cent of its taxable income for H2 2008, saw a 21.3 per cent erosion in market cap this month to $423.5 million.

The S-chips universe saw a sea of red in market caps as the Chinese companies announced a mixed bag of earnings. S-chips were dealt another blow this week from credibility woes arising from accounting problems in FibreChem Technologies.

Auditors at FibreChem could not finalise its trade receivables and cash balances, and consequently, the group was unable to announce its fourth-quarter earnings and hold a results briefing as scheduled.

The embattled stock lost 47.5 per cent of its market cap in February to $93.6 million. Trading on the stock was halted on Monday and then suspended on Wednesday.

Spooked by poor sentiment and weak earnings results, China Hongxing's market cap slipped 44.7 per cent to $279.8 million, Synear's dived 39.6 per cent to $220 million and Li Heng's dipped 47.2 per cent to $238 million. Chinese developer Yanlord's market cap fell 25.3 per cent to $1.29 billion as sales and profits slowed in the fourth quarter.

Banking stocks also had a poor showing on concerns over higher provisions for bad loans, which showed up in their earnings report cards. DBS Group's market cap lost 11 per cent to $17.89 billion, UOB's fell 15.9 per cent to $15.22 billion and OCBC slid 13 per cent to $14 billion.

Of the advancers in February, Venture Corp gained 20.3 per cent in market cap to $1.35 billion, Keppel Corp put on 7.9 per cent to $6.96 billion and Neptune Orient Lines rose 6.2 per cent to $1.77 billion.

With the earnings season out of the way, the stock market may lack direction in the weeks ahead amid a dearth of newsflow, analysts say. But their market view remains unanimous - that it could get worse before it gets better.

'The worst would be in May, which has been the worst month over the past few years,' said Kim Eng's Mr Tai. 'If there has to be a bottom this year, it will likely be September or October, where we are looking at 1,200 points for the STI (Straits Times Index), which means 30 per cent downside (from current levels).'

Mr Ng of CIMB-GK noted that while the bearish view has not changed, there are always trading opportunities when big falls take place. He recommended stocks that are fundamentally strong but have fallen below October's lows.