Oct 12, 2007
TAKING STOCK: STI hits record high as it rejoins regional bull run Market buoyed by prospects of strong growth, China funds buying overseas shares
ONE day was all it took for the local stock market to regain its composure and come roaring back, after the sudden sell-off on inflation fears late on Wednesday. Yesterday, traders and foreign funds alike were quick to grab back the blue chips which they had abandoned the previous day.
There were several factors for their bullishness - prospects of strong economic growth as well as effective negative interest rates on higher inflation, and panic buying by foreign fund managers afraid of missing out on the China bull run.
This swept aside any lingering concerns sparked off by news that Singapore's central bank was allowing the Singapore dollar to appreciate to combat rising inflation. The resulting buying frenzy fuelled a sharp rebound which enabled Singapore to rejoin the bull run which other regional bourses had been enjoying since Monday, following hopes that the US Federal Reserve may cut rates again.
With banks, shipyards and property developers leading the charge, the benchmark Straits Times Index (STI) was literally on a roll, erasing all of its losses from Wednesday's late sell-off in a matter of minutes.
It almost managed to touch the 3,900 barrier again, which it briefly reached on Wednesday, missing by a mere three points as it hit an intra-day high of 3,897.1 in late trading. The STI finally closed 61.32 points higher, or 1.6 per cent higher, at 3,875.77. A hefty 2.81 billion shares worth $2.76 billion changed hands.
On the scoreboard, there were 563 gainers and 267 losers.
Most of the big gainers were S-shares. The PrimePartners China Index, which tracks 25 S-Shares, rose 9.99 points, or 3.4 per cent, to 305.71. One big gainer was Cosco Corp, which gained 45 cents to $6.90, after the Baltic Dry Index, which tracks freight costs for commodities, rose above 10,000 points, bolstered by demand from China.
Another counter, Jardine Cycle & Carriage, jumped $1.10 to $20.20, after strong demand for the Hong Kong initial public offering of motor trading group Dah Chong Hong, which raised HK$4.6 billion (S$869 million).
One dealer said: 'China is making the headlines every day and this is making foreign fund managers nervous. If they ignore the region, they will underperform their peers.' Funds on the prowl for laggards zeroed in on Singapore, as Hong Kong was on fire, as the Hang Seng Index surged above the 29,000 barrier, and the Hang Seng China Enterprises Index, which tracks giant China firms, rose an eye-popping 5.1 per cent.
Traders were emboldened by the increasing number of China funds, partly owned by foreign banks, given the go-ahead to raise money from mainland investors to invest in foreign shares.
Besides Harvest Fund Management, which set the bulls galloping last week with news that it could invest in overseas equities, another two funds - linked to Credit Suisse and DBS Bank respectively - have also reportedly got the same go-ahead since then.
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