Published April 1, 2009

Mild March for markets, but long haul ahead

Total capitalisation rises slightly, though worst may not be over yet

By OH BOON PING

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(SINGAPORE) The Singapore stock market rebounded slightly last month, with overall capitalisation at March 31 rising 5 per cent or $18.6 billion to $386 billion from a month ago, but some analysts were reluctant to say it had bottomed out.

Although March's figure was up from February's close, the market value was still down from the $394 billion seen at end-January.

Overall, most corporations have shrunk year to date. SingTel retained its crown as the biggest listed firm in terms of value, despite its market capitalisation contracting 0.8 per cent to $40.3 billion since the start of the year. Market capitalisation is calculated by multiplying the company's share price by the total number of shares.

'Daily trading volume on the Singapore market has fallen quite sharply year on year this year. For example, daily volume fell 46 per cent in January, 45 per cent in February and 26 per cent in March. This was similarly reflected in trading value which fell 54 per cent, 53 per cent and 47 per cent correspondingly,' said Carmen Lee, head of OCBC Investment Research.

'While the numbers are better in March versus February, these are still significantly below the average in 2008, reflecting the still very cautious mood in the market,' she added.

CIMB-GK research head Kenneth Ng said that 'the stock market rally in March came about because equity ownership levels were very low and price-book valuations were getting comparable to previous recession troughs'.

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

Malaysian palm oil giant Wilmar International, which took fourth spot on Dec 31, 2008, posted a 13.6 per cent recovery to $20.2 billion and claimed second spot in the table.

A weakening property sector marked by weak demand and concerns about potential asset writedowns saw a number of property stocks such as K-Reit, Keppel Land and Suntec Reit report lower market values.

Banks were hammered as well. United Overseas Bank reported a 24.8 per cent drop in market cap to $14.8 billion, while OCBC's value dropped 3 per cent to $15.1 billion.

The exception is DBS Bank, whose value went up 0.4 per cent to $19.3 billion.

Bourse operator Singapore Exchange gained 0.4 per cent in market cap last month to reach $5.45 billion, though this was still slightly lower than its $5.54 billion low at the end of January.

Some of the more prominent China shares such as Cosco Corp and Yangzijiang have declined by more than 10 per cent in the year to date.

Speaking to reporters yesterday, CMC chief market strategist Ashraf Laidi said that any rebound seen in the meantime is likely to be a bear market rally which will not last very long, and that equity markets worldwide may hit lower in the coming months.

Said Ms Lee: 'As the US economy and other major economies are still heading towards uncertain times, the recent correction in equity markets is a reflection of market watchers demanding more sustainable positive indicators as well as other investors locking in profits of the past few weeks.'

However, Mr Ng believes that the timing for hitting a bottom appears to be drawing close, based on average duration of historical bear markets.

'Plans in the US to get bad assets off the balance sheet of their banks should stem the deflation trend that was threatening to spiral out of control', and 'willingness to lend is the next thing for regulators to cajole'.

CIMB thinks that yields in S-Reits remain attractive, while manufacturing stocks 'did well even though the export sectors are suffering'.

Mr Ng said: 'One of the reason was that the sector had been unloved for quite some time. Telcos outperformed early in the year, but lagged when the markets rallied.'

Sectors that CIMB sees as recovery proxies are financials, plantations and offshore & marine.

'We believe that current monetary policies, pump-priming and rising protectionism can stoke inflation and the risks are inflation coming back strongly. Property is typically an inflation hedge, but that is the only sector we remain wary on, due to rising supply and falling demand.'