Traders hope to shrug off market blues

PICK-ME-UP: The local bourse has yet to see an acceleration, but things are going well for supermarket operator Sheng Siong, which JPMorgan says continues to gain market share and enjoy improved margins.


    Sep 15, 2014

    Traders hope to shrug off market blues

    THERE is a sequel to the well-known trading adage warning investors to "sell in May and go away", so as to avoid the seasonal summer decline in the stock market.

    Part II of the saying advises them to come back to the market only after St Leger's Day - the second Saturday of September - which happened to fall last weekend.

    At least in Britain, where the adage was coined, the saying has a good track record of truth. The stock market there has enjoyed a pick-up in post-summer activity in previous years, as finance professionals returned refreshed to the office in September following a relaxing break spent at the beach.

    For remisiers complaining of sluggish activity on the local bourse, their fervent prayer is that this peculiar trait in the British stock market will somehow rub off on investors here this year.

    Last Friday, overall market turnover was only a mere 1.1 billion units, worth $788.4 million in all.

    This was well below the daily average stock market turnover of $997 million registered last month and $954 million in July.

    Remisiers noted that the drop in trading activities here is puzzling, considering that other markets such as Hong Kong and Kuala Lumpur are doing brisk business.

    But those other markets have specific driving forces.

    One trader observed that the explosion in trading activities on Bursa Malaysia is being fuelled by local fund managers' purchases. This, in turn, has lured investors from our end of the Causeway to jump into the fray too.

    As for Hong Kong, the excitement over the impending launch next month of the "Shanghai-Hong Kong connect", which will give mainland investors direct access to stocks listed overseas, is drawing big sums into the territory.

    The "through train" connection will also provide global investors with an easier access to the Shanghai stock market.

    Citi Investment Research's latest funds flow report showed that last week alone, about US$700 million (S$884 million) flowed into tracker funds which invest in China stocks listed in Hong Kong. This, in turn, made up about 41 per cent of the US$1.7 billion which global investors poured into Asian funds in that period.

    Given the beehive of trading activities elsewhere, foreign investors may continue giving Singapore a miss.

    In its latest Singapore strategy report, JPMorgan advised investors here that "sector and stock picking continues to be critical".

    This is in view of the underperformance of the local bourse vis-a-vis the region.

    It said: "The key to domestic Singapore is productivity. That statistic has now fallen back to negative territory unfortunately."

    In the consumer space, it is bearish on Genting Singapore, noting that casino operators had pushed for volume growth in Singapore's mature gaming market by trying to attract more overseas high-rollers.

    However, this is "now driving bad debt expenses higher" as the casinos offer more credit to premium gamblers.

    JPMorgan is positive on Sheng Siong, noting that the supermarket operator continues to gain market share and enjoy improved margins.

    "Excess capacity within Chinese food suppliers led to better pricing for Sheng Siong private label goods," it added. JPMorgan recently helped Sheng Siong raise about $80.4 million by placing out 120 million new shares.

    The US investment bank also touched on Singapore lenders. It noted that investors in local banks may switch their focus from worries about China to anxiety over narrowing of net interest margins and lack of deposit growth.