Dec 17, 2013

    STI slides back into the doldrums

    THE Singapore market returned to all-too-familiar losing ways yesterday, in an increasingly forgettable month for investors.

    The benchmark Straits Times Index (STI) had snapped an eight-session losing streak by rising 6.98 points on Friday.

    But it was back into the red yesterday, dropping 12.25 points, or 0.4 per cent, to 3,053.77.

    Investors were concerned that the United States Federal Reserve could reduce its massive money-printing programme as early as tomorrow, at the conclusion of its December policy meeting.

    The scheme, known as "quantitative easing", has boosted markets worldwide and a scaling back will most likely drag down stock prices.

    Investors were also grappling with a weaker-than-expected preliminary reading of Chinese manufacturing data.

    Elsewhere in the region, Tokyo fell 1.6 per cent, Shanghai dropped 1.6 per cent and Hong Kong lost 0.6 per cent.

    Singapore's STI is down 3.9 per cent for this month, with far lower trading volumes another feature of the year-end lull.

    The average daily turnover for the bourse this month has been only $1 billion, compared with the past year's $1.41 billion.

    Turnover yesterday was even lower, at only $687 million.

    The STI's commodities companies fell, as Golden Agri-Resources lost one cent, or 1.8 per cent, to 54 cents; Olam International slid one cent, or 0.7 per cent, to $1.425; Noble Group eased half a cent, or 0.5 per cent, to $1.02; and Wilmar International shed one cent, or 0.3 per cent, to $3.37.

    Outside the STI, retail operator Dairy Farm International Holdings fell six US cents (eight Singapore cents), or 0.6 per cent, to US$9.55.

    DBS Vickers Research yesterday downgraded the stock to "hold" from "buy" and reduced the target price to US$9.46, from US$11.60.

    "We believe earnings will likely be soft for financial year 2013, and lower margins (owing to) higher labour and utility expenses, as well as lower gross profit, could impact growth for (the financial year)," said DBS Vickers.

    "We are hence moderating our earnings (forecasts) for financial years 2014 and 2015... in anticipation of lower earnings."

    DBS Vickers believes that Dairy Farm's food business is likely to record lower profits this financial year. The firm was also affected by the weaker Malaysian ringgit and Indonesian rupiah, said DBS Vickers.

    While it no longer rates Dairy Farm as a "buy", it said that the stock's current valuation is justified, as it tends to trade at a slight premium to its peers.