THE Straits Times Index (STI) might have risen 15 points over the week to 3,192.9 thus giving the impression of a relatively firm week, but the reality is that the market is struggling with thinning volume and what appears to be growing uncertainty over the outlook for 2013's final quarter.
In yesterday's session when the STI gained 6.28 points, turnover amounted to just 1.7 billion units worth $1 billion. Of the dollar value, a hefty $602 million or 60 per cent was done in the 30 STI components, which suggests that activity in penny stocks has dropped off sharply. A large number of retail brokers have confirmed this, reporting virtually no business from their clients.
The main market-moving development as far as blue chips were concerned was that US politicians agreed to kick the country's fiscal can down the road when they raised the government's debt ceiling for the time being, at least until Jan 15, 2014.
That a compromise - albeit one that is only temporary - was eventually reached did not come as a surprise at all since the alternative of the US government defaulting on its debt payments was extremely unlikely and no one really expected it to happen.
As it turned out, after much dramatic posturing and finger-pointing, it was the Republican Party which backed down with its demands, though it remains to be seen what happens between now and the new Jan 15 deadline.
This "governing by crisis", however, presented traders with an opportunity to "buy in anticipation and sell on news", with Wall Street rising before and during the announcement of a deal, but falling the very next day.
In the local market, the main plays this week continued to be penny stocks, although in much subdued trading compared to a fortnight ago. Singapore Exchange's recent decision to declare three speculative stocks as "designated securities" probably contributed significantly to curbing trading in the pennies, as did the mysterious crash suffered midweek by Chasen Holdings when it lost 54 per cent in one session. The stock of the investment holding company, whose businesses include logistics and engineering services, ended the week 24.5 cents or 57 per cent down at 18.5 cents. When queried by SGX, the company said it did not know what was behind the selling.
In its latest fund manager survey, Bank of America Merrill Lynch (B0AML) found that 71 per cent of respondents expect global economic growth to remain "below trend" in the coming 12 months, up from a net 61 per cent a month ago, and that 18 per cent expect corporate profit margins to fall, up from 11 per cent a month ago.
"Asset allocators have scaled back their equity holdings. A net 49 per cent of global asset allocators are overweight equities, down from a net 60 per cent in September," said B0AML. "Over the past month, investors have reduced their positions in eight out of the 11 sectors monitored by the survey. Last month, a net 9 per cent of the panel remained overweight US equities, and this month, that measure has dropped to zero per cent."
Overall, 235 panellists with US$643 billion of assets under management participated in the survey from Oct 4 to 10.
A total of 183 managers managing US$500 billion participated in the global survey, while a total of 118 managers managing US$291 billion participated in the regional surveys.