22 Feb 10 : So China Market Did Not Crash...

Pre-Market Open Commentary for 22 February 2010
DJIA: 10402.35 +9.45
Nasdaq Composite: 2243.87 +2.16

Following a weak open last Friday in reaction to the Fed’s decision to boost the emergency bank lending rate, the US market managed to claw out gains as the knee-jerk reaction gave way to a more measured take since the Fed’s move will not impact borrowing costs for consumers and businesses. The government’s reading on consumer inflation, which came in better-than-expectations, indicating that pricing pressure remains minimal, also helped lift market sentiment. Consumer price index (CPI) rose 0.2% in January, against expectations of a rise of 0.3%, after rising 0.2% in December while core-CPI declined 0.1% in January, against expectations of a rise of 0.1%, after rising 0.1% in December.

For the week, all the major indices ended higher. The Dow Jones Industrial Average rose 3.00% and S&P 500 climbed 3.13% to end at 1109.17. Nasdaq composite gained 2.76%.

A bevy of reports on the housing market, employment and GDP growth are due this week. The Fed Chairman will also be testifying on the state of the economy and monetary policy before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Friday. On the corporate front, the quarterly results of Home Depot and Target will be due this Tuesday. However, on Monday, there is no market-moving company or economic news scheduled.



In Singapore today:

Most of the regional markets took a tumbled last Friday on concerns about the US Federal Reserves’ decision to raise the emergency bank lending rate. The STI did not escape the meltdown but managed to claw back losses towards market close, to end 12.05 points, or 0.44%, lower at 2757.14. For the week, the STI closed virtually unchanged, easing 1.76 points or 0.06%.

Expect the broader market to take leads from the positive overnight close on Wall Street last Friday as initial concerns over the Fed’s decision to raise discount rates eased given that the higher rates will not hike consumer or corporate borrowing costs. The property sector, however, is expected to react negatively to last Friday’s announcement by the government to impose a seller’s stamp duty and tougher rules on bank lending to curb property speculation. The new measures are expected to dampen sentiment on the property sector in the short-term.

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Mid Day February 22. STI rose at mid-day.

Wall Street improved through the session Friday to close in positive territory as traders worked off the initial FED shock. For now, traders saw the hike in the discount rate as confidence in the economic recovery. Fears about a meltdown in the Chinese stock markets abated when the Shanghai Composite (SSEC) re-opened today after its week long close for the Chinese New Year holidays. At the time of this writing, the SSEC closed 0.2 per cent down and traded in a narrow range. The STI index rose 11.67 points at 2768.79 points. For every stock that fell, 2 rose. Turnover was light on 642mil shares with a value of $672mil shares.

The Singapore Government announced Friday after the market closed further measures to cool the property sector. A seller's stamp duty and a lower loan-to-value limit of 80 per cent for all housing loans was largely seen as symbolic and targeted at speculators. Nonetheless, property counters fell as sentiments weighed on the sector. Shares of CapitaLand, City Developments, Ho Bee, Allgreen Properties, Wing Tai and Keppel Land fell between 4 and 60 cents.

On the balance, shares of Genting Singapore, Noble Group, Indo Agric, Straits Asia, Ezra, Ezion, SIA, UOB, Jardine C&C, DBS and OCBC bank rose between 2 and 40 cents.

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Market close Feb 22. STI closes flat despite positive start

Fears about a meltdown in the C hinese stock markets abated when the Shanghai Composite (SSEC) re-opened today after its week long close for the Chinese New Year holidays. While China indices eventually closed down, the volatile Hang Seng Index closed up 488 points up, and in the process, aided sentiments across the region.

But profit taking again whittled the gains in Singapore and at closing bell, the benchmark STI closed up a mere 0.32 points to 2757.46. For every stock that fell, 2 rose. Turnover was light on 1.1bil shares with a value of $1.2mil done.

There was profit taking in the property counters after the Singapore Government announced last Friday further measures to cool the property sector, and prevent a bubble. An additional seller's stamp duty on units sold within a year of purchase, and a lower loan-to-value limit of 80 per cent for all housing loans was largely seen as symbolic and targetted at speculators. Nonetheless, property counters fell as sentiments weighed on the se c tor. Shares of City Dev, CapitaLand, Wing Tai, Ho Bee and Keppel Land fell between 7 and 52 cents.

On the balance, shares of Jardine C&C, STA Panocean, SIA, and F&N, rose between 10 and 38 cents.

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