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By Pehon | July 18, 2007
The STI was down 67.08 points today. Losers lead gainers by 931 - 132. At the time of this post, Dow Jones is down by 47.23 points.
We saw similiar situations happen in Europe, and closer to home, Hong Kong, which fell 215.38 points.
If you were to look at most news report, they cite the reason for this fall to falling margins with Intel and rising concern that China’s going tighten their monetary policies in view of rising inflation. But thats internationally. It doesn’t explain the 1.8% drop in the STI.
So what happened?
A look at local news, the most direct cause could just be the government’s announcement of “higher development charges”. This is a direct implication to property sector. A look at how the STI component stocks in the property sector.
- Allgreen -3%
- Capital land -1.9%
- Citi Dev -2.5%
- HLH -5%
- Kep -1.7%
- UOL -4.3%
- Wing Tai -6.6%
A quick look, only 1 stock fell less than what the index did. that really tells us that the property sector was the hardest hit in the STI. And thats just the property sector. Reits and constructions do have a very close relationship with the property sector, and indeed, they have all fallen.
With recent gains in world market, including Singapore, investors are just anxious about a correction that comes so naturally, after new highs are made, in recent times. Investors has taken the government’s announcement, and the drop in property stocks as an excuse to profit take, possibly causing the sell off today.
“Today’s sell off is just a short term excuse for profit taking”
A quick look at the STI chart since end Feb, we have seen this before. In fact, the biggest single day sell off isn’t today. Look at April’s sell off. It has happened before. And like before, fundamentals hasn’t changed.
“Earnings are expected to be up to expectations this season. ”
In fact, Intel didn’t disappoint. Yahoo! disappointed, but not due to a problem with its industry. Google is just too popular. Fundamentals in US is still intact. So is in Singapore. Closer to us, the Chinese companies’ fundamentals are improving.
Never mind ridiculous rise in penny stocks. They don’t affect the STI index. Never mind if there’s a penny stock crash. Again, they wouldn’t affect STI. The damage would be “localised”. Fundamentals are the one that have a collateral effect on the STI, and its not going to deteoriate.
“Penny stock bloom, penny stock slump. Who cares. It doesn’t directly affect the on the STI”
The economy is still healthy. Corrections occur from time to time after the market makes new highs due to nervous investors finding the smallest excuse. There is no indications of large investment funds withdrawing investments from Singapore, its all “forum-say”.
”There is no indications of large investment funds withdrawing investments from Singapore, its all ‘forum-say’”
With the upcoming earnings season, fundamental investors will be parking their money in sound companies instead of cashing them in. Its in my opinion, the sell off today is a knee jerk reaction by anxious CFD and Contra traders, and is probably going to be a VERY short lived bear market.
Topics: Indexes&Economy |
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