Dec 02, 2013

    A year of snakes and ladders

    The Straits Times

    AS TRADING for the year enters its final month today

    , hopes of a rousing send-off for the stock market are fast fading, with trading activities grinding to a halt.

    Some may recall that around this time last year, analysts were falling over themselves to make smug projections that stock markets - including Singapore's - would continue to boom, as long as the United States central bank continued to flood the world with cheap dollars.

    Stocks did blossom in a big way on Wall Street, where both the Dow Jones Industrial Average and S&P 500 set new records last month as US investors ploughed ever-larger sums into equities.

    In Singapore, it turns out that the dour geomancers, rather than the bullish analysts, made the right call by predicting that the Year of the Water Snake - as this year is known on the lunar calendar - might end in tears for the market.

    This column is not in the habit of believing the astrologically inclined who offer no scientific basis for their forecasts. Still, this year has turned out to be a game of snakes and ladders in the market, with share prices scaling walls of worries until May, and slithering down on tapering fears after that.

    Worse, for some investors, the year is akin to getting bitten by a poisonous snake after losing tonnes of money in the stock market, after the great penny-stock crash in October which saw over $10 billion in market value evaporating in a matter of days.

    Now with Christmas just around the corner, the annual round of market predictions has kick-started again. Few people will remember in a year's time what the forecasts say but it is still worthwhile to report what the research houses have to offer after gazing at their crystal balls.

    UOB Kay Hian, for example, has a 2014 year-end target of 3,400 that is based on a 10 per cent discount to the long-term average valuation of price-to-book and price-earnings ratios.

    It advises investors to look for buying opportunities when there is a correction in stock prices.

    In particular, it expects "potential headwinds" as talk of tapering gains momentum next year. "In terms of sectors that could be adversely impacted by tapering talk, these include Reits, developers and supply-chain companies," it said.

    OCBC Investment Research notes that the recent third-quarter corporate results "point to a cautious optimism for 2014 and this could mean a high single-digit earnings growth for STI stocks".

    It said: "As the year draws to a close, some of this year's blockbuster movies aptly capture the mood here. It is almost a "Hunger Game" as the "starving" Singapore market kicked off the year well and hit a recent high in May. But the market lacked an Iron Man's will to hold on to the gains."

    Among its top picks are counters in the oil-and-gas sector, such as Keppel Corp and SembCorp Marine which have built up robust order books.

    JPMorgan Chase, however, noted that the STI is stuck in a sideway range. It said: "2,990 (for the STI) is an important support level which, if broken, will accelerate the downside."

    On Friday, STI had ended the week virtually unchanged at 3,176.35.

    Like OCBC, JPMorgan's top picks include offshore plays such as Keppel Corp and Ezion Holdings, but it is also bullish on counters such as plantations giant Golden Agri-Resources and Jardine Cycle & Carriage which have big exposure to the Indonesian economy.