BT: Price plunge lays low 113 SGX companies (19 Jun 2006)

Business Times - 19 Jun 2006

Price plunge lays low 113 SGX companies

Number of companies trading at 52-week lows touches highest level since June 2005

By TEH HOOI LING

(SINGAPORE) With the sharp slide in the stock market last week, the number of Singapore companies whose share prices have hit their one-year lows has risen to the highest level since June 2005.

On June 13, there were 113 companies which sank to their 52-week lows. Based on numbers taken on the first of every month, the previous high was on June 1, 2005 when the share prices of 118 companies slumped to their lowest levels in the past year.

The rebound on Friday, however, lifted nearly half of the stocks off their lows. Still, as of Friday, the average price of all Singapore-listed stocks is 64 per cent below their one-year highs.

Again, prior to this, the previous lowest level was on June 1 a year ago when the average price was 66 per cent below their one-year highs.

And it seems size does matter when it comes to weathering a storm in a down market. Companies with market capitalisation of $1 billion and above were trading at 60 per cent below the top of their one-year trading range on Tuesday, June 13, when markets around the world took a heavy beating.

The number got progressively bigger as the company size got smaller. For stocks with a market cap of $50 million or less, prices were trading at 71 per cent below their one-year highs.

In a weakening economic environment, it is the smaller companies which will suffer the most drastic squeeze on profit margins.

Meanwhile, the recovery in the last three trading sessions benefited companies with market caps of between $100 million and $200 million the most. On average, the prices of 100 companies jumped 4.5 per cent. Those with market caps of $200 million to $1 billion rebounded 4.1 per cent and big caps - above $1 billion - managed to recover 3.5 per cent.

Again the numbers showed that the market is not much interested in companies with market caps of $50 million or less. As a group, they eked out a gain of a mere 1.4 per cent despite the Straits Times Index chalking up its biggest one-day gain in the past three years on Friday.

As of Friday, big caps are near the half-way point of the previous 52 weeks' trading range, while smaller companies are about 60 per cent down from the top.

Companies which have stayed resilient and maintained their prices within the top 10 per cent of their one-year trading range include Golden Agri, UIC, Hotel Negara, Pertama Holdings, Keppel Telecoms & Transportation, Asia Food & Properties and Raffles Medical.

Meanwhile, analysts are expecting continued volatility and weakness in South-east Asian markets in the next few months. 'Companies' second-quarter earnings may show a little weakness,' Reuters quoted Edwin Goh, head of Asian research at ABN Amro Asia Securities, as saying.

The past few weeks' turmoil in global financial markets stemmed from the uncertainty over how far the US Federal Reserve would go in raising interest rates. The fear was that too much tightening would induce a recession.

Kim Eng Securities said that for East Asia, export-driven economic growth was potentially at risk. 'However, given the balance the Fed is bound to strike between economic growth and stable prices, and the results of the latest Beige Book (the Fed's economic survey), we believe one more rate increase will do the job.'

It added that the lagged impact of tighter monetary policy on moderating growth will become increasingly more evident in future data releases, and that a nascent rise in inflationary expectations will be restrained with a June rate increase. 'For East Asia, one more 25-basis-point increase cannot change its essentially robust economic fundamentals. Except for Hong Kong, which pegs its currency to the US dollar, monetary policies in the other countries we cover are much less dependent on US policy.

'Furthermore the prospect of higher US interest rates finally seems to have had its cooling impact on commodity prices as well in recent days, potentially weakening the major source of inflation worldwide,' Kim Eng said.

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