Published March 3, 2009

More shorter-term calls from brokers emerging

Recommendations are for periods of a day to 3 months

By LYNETTE KHOO

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AS short-term directional trading differs increasingly from long-term fundamental views in a panic-stricken market, shorter-term trading cues have taken on more significance.

In a move to provide visibility on where prices may be heading in the very near term, DMG & Partners Securities yesterday introduced a new investment research product called Trading Call to give short-term trading ideas ranging in duration from one day to three months. This is targeted at the retail segment.

'At this point, we do not want to neglect any segment of our clients, whether retail or institutional,' said DMG & Partners Securities co-head of research Terence Wong. 'We are beefing up our client base on both ends and building our products, so during this period, we will be seeing more enhancements of our products.'

DMG highlighted nine stocks - five with 'buy' calls and four with 'sell' calls and each of different duration. It also provided technical or fundamental reasons for recommendations made. 'This trading portfolio will be issued every fortnight, but updates will be given if there are changes to our calls,' said DMG.

The brokerage said in the report that investors should take action to reverse the call on the 'buy' or 'sell' position after the stock moves up or down by 5 per cent within the indicated period.

As its trading recommendations may differ from its long-term fundamental views, DMG cautioned investors to 'be sure to tread carefully'.

Intense market volatility has led some observers to wonder if brokerages should issue more trading calls for durations shorter than the typical 12-month view.

But some brokers say that the issuance of short-term trading calls is not new. Research units regularly issue internal notes to their dealers and remisiers on day-to-day trading views. They may customise these recommendations for the retail investors based on their risk appetite and time horizon.

For instance, CIMB-GK issues two trading reports a day - one in the morning and another in the afternoon. KELIVE Research issues daily market watch for its in-house dealers and remisiers to offer trading ideas for the day.

'Very few people can tell you with a reasonable degree of confidence what can happen to the market six months or one year down the road,' said UOB-KayHian dealing director Chan Tuck Sing. 'Taking a long-term view would be difficult unless you have strong convictions or deep pockets.'

While trading long positions may be going against the grain, the risk-reward for short positions on the other hand becomes lower as the market trends downwards, he added. Traders, hence, look for situations where they can trade very short term.

Research houses note that there is now more demand for short-term trading cues.

'Now that volatility is high, there is more interest in it,' said Carmen Lee, research head at OCBC Investment Research (OIC). Still, there will always be demand for longer term investment views from institutional funds.

Among the recommendations in DMG's first Trading Call yesterday was a 'buy' call on China XLX Fertiliser for one month; a 'buy' call on StarHub for two months. It also has a 'sell' call on China Hongxing for two weeks; a 'sell' call on SGX for one month, and a 'sell' call on Suntec Reit for three months.