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IN TIMES of tumult, investors traditionally turn to defensive stocks such as those in the utilities and consumer staples sectors, or those which pay high dividends, but this time appears to be different - the best performers amid the widespread volatility and sell-downs in the second half of last month were smaller counters that tend to get little attention from institutional investors.
A compilation by The Business Times using Bloomberg data showed that generally lesser-known companies such as dry bulk shipping firm Mercator Lines and Chinese underwear company Great Group were the ones whose shares seemingly defied gravity over the past few weeks.
The prevalence of such stocks in the top rungs of the price appreciation ladder could support a theory that the recent equity sell-off was driven by an investor exodus out of Asian index funds, some analysts say, adding that it also implies that the situation could get worse.
Furthermore, market watchers were quick to note that many of the recent top performers also announced corporate action or other related news that likely boosted their prices during the period, and this makes it difficult to draw inferences about how resilient they truly are in times of crisis.
Stock markets worldwide have been in turmoil ever since China's first devaluation of the yuan on Aug 11. The blue-chip Straits Times Index (STI) has fallen about 333 points or 10.4 per cent from its last close as at Aug 10 - or effectively Aug 6, since Aug 7 and Aug 10 were public holidays. It is now 15 per cent down for 2015.
Looking at share price performances from Aug 10 to Sept 3, 54 out of the 698 Singapore-listed stocks with Bloomberg data had advanced over that period while 16 were flat and the rest lost ground. After removing stocks that were not traded every day apart from trading halts, the top 20 were mostly pennies.
The only STI component among them was commodities trader Olam International, a thinly traded stock which will be removed from the STI from Sept 21 because of new liquidity requirements.
Other counters that may be more easily recognisable include cord blood storage provider Cordlife Group and contract manufacturer Venture Corp. Analysts have remained bullish about Venture Corp in particular, saying it will benefit from the weak ringgit and strong US dollar.
Bigger names such as Jardine group stocks and SIA Engineering start to appear only further down the list. Overall, the top 40 performers were dominated by sectors such as industrials, financials and consumer discretionary, with healthcare and consumer staples near the bottom.
Though cautioning that more analysis would be needed to determine how much of recent price performance was due to innate resilience as opposed to support from a big announcement, analysts said the predominance of pennies among those that held up the best suggested that index fund outflows could be behind the decline on the local bourse.
One reason top performers were mostly smaller companies this round was that their prices were probably "not efficiently reflective of their value ... because there's no interest in them in the first place and no active discovery of valuation", said Voyage Research head Roger Tan.
He added that even if the stock had been traded every day, "we would need to see who is trading against who". "A lot of the companies are almost illiquid ... we can't separate out whether they are truly resilient. For some stocks, a little bit of trade can keep the price up if there are only a few contracts."
CMC Markets strategist Nicholas Teo also noted: "All these stocks that did well either have an individual story behind them or little institutional interest." Investor redemptions from index funds had likely triggered "non-discriminate selling across index stocks" in Asia, he said, adding that this ironically implies that the biggest blue-chips in Singapore could bear the brunt of the sell-down.
"The scary thing is, if you are an ETF investor, you'll be reading news about the mayhem in China's economy, protests in Malaysia, bombs in Thailand, elections in Singapore and you may think, better get out of Asia. If some financial company or investment bank comes up with short ETFs, then this situation can actually continue for some time."
Phillip Futures analyst Daniel Ang said he had seen a trend of funds being pulled out of Singapore and Asia ETFs. Capital is moving instead to regions such as Europe where an expected round of quantitative easing could lift European stocks, he added.
Bank of America Merrill Lynch said in a Friday note that capital flows into emerging markets in Asia "have come to a stop and turned negative in recent weeks", particularly for stocks, with the magnitude of portfolio outflows being comparable to those seen in the 2013 "taper tantrum" when the US Federal Reserve started tapering its quantitative easing programme.
For local shares, however, corporate action likely played a substantial part. The roughly 13 per cent rise in Olam from Aug 10 to Sept 3, for instance, was mainly on the back of the stock's surge in late August just before the announcement that Japan's Mitsubishi Corp agreed to buy a 20 per cent stake.
Other examples include plastic components maker Chosen Holdings, which jumped 18.7 per cent last Wednesday on news of a potential takeover offer, and furniture maker KLW Holdings which underwent a change in control on Aug 26.