Market starts year on low volume, low volatility

IN a holiday-shortened week that straddled 2014 and 2015, the Straits Times Index (STI) managed a three-point rise to 3,370.59 to go with last year's gain of 6.2 per cent. The bulk of 2014's rise came from bank outperformance, so it shouldn't come as a surprise that this week's main bluechip plays involved DBS, UOB and OCBC.

Friday's session yielded a 5.44-point rise for the STI, an advance-decline score excluding warrants of 279 to 154, and weak volume of one billion units worth S$557 million. This full-day figure compares with Wednesday's half-day total of S$514 million.

Many players are said to be still away because of the holidays, so perhaps the poor volume is understandable. By the same token, however, is the worry that liquidity, which dried up considerably in 2014, will continue to do so in 2015. For comparison, the first trading day of 2014 saw 4.33 billion units worth S$847 million done.

Penny stocks featured prominently on Friday's actives list which was headed by Top Global, Mirach Energy and IHC. Shares of China Minzhong finished S$0.18 or 21 per cent higher at S$1.04 with 1.3 million traded. The company on New Year's Eve announced it had received a letter from China Minzhong Holdings saying that the latter is looking to buy 347 million shares or 52.94 per cent of the company from PT Indofood Sukses Makmur at S$1.20 per share, and that a general offer may be made.

Offshore oil firm Swiber's shares rose S$0.015 to S$0.285 on volume of 5.1 million. The company has proposed a rights issue at S$0.15 per share to raise about S$45 million. OCBC Investment Research said thatthough valuations are low, it prefers to remain cautious on Swiber due to:

"Assuming that all the rights shares are taken up, our fair value estimate drops from S$0.34 to S$0.24 (based on 0.3x FY15 price/net tangible assets). Maintain Sell," said the broker.

Elsewhere in the sector, shares of Nam Cheong rose S$0.015 to S$0.33 on volume of 20 million done. OSK DMG noted that Nam Cheong sold two vessels for around US$45 million and that the latter's shallow water vessel price tag remains unchanged despite collapsing oil prices. The broker maintained a "buy" with its target for Nam Cheong adjusted to S$0.58 from S$0.61.

In its Jan 2 Singapore Strategy report titled "Go against the flow", OSK DMG advised investors to adopt a contrarian stance. "We believe in investing where most fear to tread, namely the offshore & marine and property sectors. The free fall in oil prices will continue to grapple the market, although we believe that prices will recover some time before the middle of the year. This ought to set the stage for a rebound in the offshore & marine sector.

"As for property, the physical market is likely to remain subdued, leading to a fall in residential prices by up to 10 per cent, in our view. We expect some cooling measures to be lifted in H215, which should see interest returning to this segment."

It set a year-end STI target of 3,720 based on 15 times FY2015 earnings, driven by:

Over on Wall Street, the Dow Jones Industrial Average on Wednesday dropped 160 points or 0.9 per cent to end 2014 at 17,823. Despite this fall, the index posted its sixth straight year of gains, rising 7.5 per cent over the 12 months . The broader S&P 500 recorded its third consecutive annual increase, up 11.4 per cent for the year. However, it dropped 21.45 or one per cent on Wednesday to 2,058.