Published July 1, 2009

S'pore market cap surges 38.7% in H1

Top five companies retain May rankings in June, which sees just 1.7% rise

By JOYCE HOOI

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(SINGAPORE) The first half of 2009 saw a roaring 38.7 per cent surge in market capitalisation for the Singapore stock market, even though the gain in June was more like a whimper.

Market capitalisation in June rose by just 1.7 per cent month-on-month to $545 billion, but still a 10-month high since last August shortly before the Lehman Brothers collapse sparked a stampede out of equities.

While the first quarter of the year saw market capitalisation failing to break the $394 billion ceiling set in January, market sentiment surged at the start of the second quarter to make up for the oversold state of stocks. April saw counters gaining 12.6 per cent in market capitalisation month on month and May recorded a further 23.2 per cent surge to $535.7 billion, as investors rushed back into the market as quickly as they had rushed out last year.

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

'In June, price-earning valuations and price-to-book-values started to normalise, so the market capitalisation also started to go back to normal,' said Yeo Kee Yan, a research analyst at DBS Vickers.

The top five companies in the market capitalisation league retained their May rankings in June, with only SingTel seeing a dip in market capitalisation, month on month.

Despite growing another 13.6 per cent in market capitalisation during H1 2009, UOB slipped from second place at the end of last year to sixth place, as the other heavyweights bulked up more in comparison.

Of the top five stocks, Wilmar International recorded the largest year-to-date increase in market capitalisation, a 79.9 per cent increase to $32.1 billion. Analysts have been bullish on the agriculture products firm of late. Last week, OCBC Investment Research initiated coverage of the stock with a 'buy' recommendation, citing the upside of Wilmar's China operations.

Of particular note for the first half of 2009 was Chartered Semiconductor Manufacturing, which vaulted from 96th place at the end of 2008 to 53rd place, more than quadrupling its market capitalisation to $1.93 billion. After Chartered's lacklustre 2008, DBS Vickers' Tan Ai Teng is upbeat about the firm's prospects for Q3 this year, following the company's 'sharp rebound' in Q2.

While property counters such as CapitaLand, City Developments and Hongkong Land Holdings held fast to their rankings from a month ago, only Hongkong Land Holdings saw an increase in market capitalisation in June as investors dithered over analysts' opposing outlooks for the sector.

In one camp, analysts believe that the property market is gaining ground, pointing to the recent increase in residential sales as reason for jubilation.

Credit Suisse analyst Tricia Song noted in a report last month that private home sales have been clearing at prices that were '20-80 per cent better than our assumptions' and believes that such levels are sustainable on the back of lower-than-expected expatriate outflow and job losses.

A recent Merrill Lynch report also raised price objectives for CapitaLand, City Developments and Keppel Land but gave investors pause as it remained less confident about the sector's sustainability post-2010.

UBS AG's director of wealth management research Thomas Kaegi was not as buoyant about the property sector. Mr Kaegi told reporters yesterday that he expects a 'modest recovery' only in Q2 2010.

'I am cautious about the renewed optimism. It looks like just a pickup in transactions, triggered by developers' price cuts,' he said.

Looking ahead, most analysts have placed their bets on bank stocks, believing that the contraction for the financial sector has come to a halt.

'Bank earnings may increase as home loans go up,' noted DBS Vickers' Mr Yeo. UBS AG's Mr Kaegi reckons that the manufacturing sector will be the next to recover, while the beleaguered retail sector will be the last.

The muted increase of market capitalisation in June also makes a larger statement about the business outlook for the country. Experts agree that the worst is over for Singapore, but it will be awhile before the go-go years return.

'The rest of the year will remain challenging, but we have seen the trough of the business cycle,' said Mr Kaegi.

While the market has pulled back from the brink, it is unlikely to soar to dizzying heights this year.