BT: S'pore stock market cap dives to 2-year low

Business Times - 01 Oct 2008

Market Capitalisation
S'pore stock market cap dives to 2-year low

Watch for chances to bottom-fish soon as downside is limited, say analysts

By JAMIE LEE

(SINGAPORE) Singapore's stock market capitalisation plunged to a two-year low last month, as the collapse of US investment banks sent shivers across markets.

But the time to go bottom-fishing is near, say some analysts, who think investors should wait for opportunities to accumulate stocks soon.

Market value sank 15.5 per cent to $515 billion last month compared with August. This is the lowest thus far, with nearly $100 billion having been wiped out in the month. The last time market cap hit such a level was in September 2006, when the market was valued at $511 billion.

Investors shunned the same few sectors, with commodity, property and shipping plays taking a hit.

Golden Agri-Resources' market cap was sliced by half to $3.14 billion, Wilmar International's dived 33.9 per cent to $16 billion while Noble Group's plunged 31.4 per cent to $4.4 billion, as crude palm oil prices are expected to stabilise over the next few months.

CapitaLand bore the brunt among the bigger property counters. The stock sank 30.1 per cent to $8.64 billion as investors fret over its exposure to the China market, though chief executive Liew Mun Leong told BT recently that it has ample risk management.

Besides poor real estate sentiment, Keppel Land was hit by concerns that the company's Eco-City project in Tianjin has a high investment cost and long returns, said one property analyst from a local bank. Its market cap fell 27.1 per cent to $2.04 billion.

With oil prices receding, the world's largest offshore rig-builder Keppel Corporation's market cap dropped 21 per cent to $12.5 billion, while SembCorp Marine fell 21.3 per cent to $6.19 billion.

Related link:

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

'It's the million dollar question right now,' said Andrew Orchard, an RBS regional strategy analyst, on whether Singapore has hit bottom. 'We do expect some form of depreciation, but my sense is that the downside is limited at this point.

'Where we might see further downside for Singapore is earnings expectations. Many analysts have not downgraded their earnings forecast for FY2009.'

Singapore's market has remained resilient compared with high-beta markets in Hong Kong and Taiwan, said Mr Orchard.

But on the whole, valuations of Asian equities have fallen way past that of the previous recession in 2003, he added, noting that average price-to-book ratio stood at 5.2 times in 2003, but is now at about 4.5 times.

'I would probably start to accumulate at 10 per cent below current levels and increase my portfolio on the way down,' he said.

'I would start to accumulate gradually because I wouldn't want to miss any rebound. It's most likely that any recovery would be pretty strong, even if it's a short-lived one.'

Kim Eng noted in its Sept 19 market strategy report that the market was 'closer to the bottom, but not there yet'.

The brokerage highlighted a 'disturbing denial' surrounding local financial institutions, noting that a 'drastic slowdown in earnings momentum is unavoidable' despite strong asset holdings and balance sheets, and expects another 18 per cent decline over the next 12 months.

Kim Eng preferred Singapore-centric property developers such as City Developments and Wing Tai Holdings. It also likes defensive blue-chips including conglomerate Fraser and Neave, and Singapore's biggest company by market cap, SingTel.

Fund manager Marc Faber told BT that while he expects all markets to rally from October to March next year, 'new bull markets are out of the question for now'.



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