Banks, Property Stocks turn out to be winners in Rebound!

Jan 28, 2008

Banks, property stocks turn out winners in market rebound
But small caps, oil and gas stocks fail to make up for lost ground
By Lee Su Shyan, Assistant Money Editor

AS THE market turbulence of early last week subsided, property stocks and the benchmark Straits Times Index (STI) ended among the winners, while small caps and stocks in the oil and gas sector languished.

The FTSE ST Reit Index was up 5 per cent in just the week to last Friday, while the real estate holding and development index was 3 per cent higher.

Similarly, the financials not only recovered, but were also 3 per cent higher than a week ago.
According to an analyst: 'In any market rebound, property stocks and banks are usually the first ones to go up.

'The small caps are more volatile. Investors who are looking to return to the market will be less willing to buy the small caps.'

Another analyst noted: 'With the Reits sold down, the yields have now become very attractive. With interest rates likely on the downtrend, investors are now looking to Reits to offer better returns.'

CapitaCommercial Trust, which invests in office buildings, ended up 27 cents or 14 per cent last Friday at $2.18, while CapitaMall Trust, which owns malls such as Tampines Mall and Junction 8, recovered 28 cents or nearly 10 per cent to close at $3.18.

Banks also recovered. DBS Group Holdings, which went as low as $16.40 last week, recovered to $18.94. OCBC Bank closed last week 12 cents higher at $7.80, while United Overseas Bank was 50 cents higher on Friday at $18.08.

The large-cap property stocks also made gains, including CapitaLand and Wheelock Properties.
The STI was up 2 per cent over the week. However, showing that nerves were still rattled, more than half the 19 indexes were unchanged or below their week-ago levels.

For example, the China index closed down marginally, falling 1 per cent for the week. While the China stocks received a boost mid-week, from news that the qualified domestic institutional investor (QDII) scheme would be extended to the Singapore market, other concerns over China exports dominated.

The managing director of boutique finance house NRA Capital, Mr Kevin Scully, said: 'The impact of the QDII scheme is not that significant in the short term. What people may have more concerns about, is that with the slowing economy, exports to the US may slow down. As well, with interest rates being cut, the yuan may soften. This may eat into manufacturers' margins and hence their profits.'

The sector showing the biggest drop was oil and gas, with the index down about 9 per cent. The index includes stocks such as Aqua-Terra Supply, Chemoil and Singapore Petroleum Company.

One analyst says that he is bearish about such commodity-related stocks. He said: 'Oil prices have peaked and if there is indeed an impending recession, the commodity stocks will be the first to suffer. There may be a slowdown in the fulfilment of orders.'

Oil closed last week at US$90.71 a barrel, way down from its US$100 levels.

Small-cap stocks have also not managed to make up for lost ground. Mr Scully said: 'Since the news of the sub-prime crisis in the US took hold in August, smaller- cap stocks have not performed well.'

A dealer with a local house said that the jury was still out.

He said: 'The next few weeks will give us a better idea of how these smaller stocks will fare. If the stocks can recover over the next few few weeks, then it will show whether the rally is sustainable or not.'

Source: The Straits Times