The Rally is Finally Here? - STI

Finally the long overdue, investor-centric, QE3 was launched by Ben Bernanke for the USA in tandem with monetary easing policies adopted in key economies around the world such as China (last weekend, on restarting rail and infrastructure projects) and Europe (unlimited bond buying programme to stabilise debt markets). Markets have been in rally mood over the last 2 days clearly appreciative of the actions taken by these economies to restart sluggish growth in the world that has been badly plagued by political inefficiency and inability.

Key market movers on Thursday and Friday on the STI included commodity counters such as Wilmar, Noble Group and Olam as well as property stocks such as Capitaland, Ho Bee and Yanlord. Interestingly, it has been mentioned on Reuters that QE3 may 'spur China's central bank' into more action' albeit with a smaller probability of happening. However, that has clearly not stopped investors from punting bets in favour of a China's recovery, hence such attention on key commodities and property counters that will be huge beneficiaries to any further Chinese bank actions. 

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STI Outlook - Buy. Singapore will be a key beneficiary when money from US, Europe and China trickles down into the economy, restarting trade activities. Extra cash on hand also spurs investment into Singapore, something at which has already been at a high this year with the Sing Dollar strengthening tremendously due to demand. The STI will also be buoyed by any further Chinese Central bank actions in the coming weeks, if any.

• MACD - MACD trending upwards and positive divergence is back.
• RSI (25d) - RSI just rebounded from 50% and headed to 70%. Still room for play.
• Bollinger Bands - Prices are already closing in on the upper bollinger and possibly pulling the bollinger bands further wide apart for more upside volatility.
• 20d MA - Prices have just crossed the 20d MA on the back of a huge gap up on Friday.
• Volume - High volume accompanying the gap up in the STI on Friday, further signalling strong upwards buying pressure from market participants and more potential upside bets being placed.

The Shipping Conundrum - NOL

Today, NOL, on the back of a 2.75% day rise, had been removed as a component of the STI and replaced with the newly SGX-listed IHH trust. Changes will take effect on 24th Sept.

The news for shipping counters really just gets worse and worse, doesn't it? In the public focus is China's slowdown where the biggest hit industry has to be that of commodities. After all, when the biggest importer of goods starts to consume less, the first hit will be raw materials and food that has been fueling its meteoric rise in the last decade. And with Europe in deadlock, and US import/export imbalance swaying without much consensus, it is no wonder that the next most correlated industry - shipping - will also bear the brunt of this economic tide.

However so, it is both good and bad news that shipping industry has been battered since 2008 owing to a supply glut, much far ahead in time than last quarter's China hard/soft-landing quibble. In fact, prices of NOL, Cosco, Yangzijiang seemed so floored that China and US slow down in the last quarter almost failed to decrease its stock prices much further. 

Now, with investors coming in to buy on the cheap, as some people have started to buzz about, shipping counters are soon to be in the spotlight again as the 'cheap buy'. 

Is it really the cheap buy?

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Third Largest IPO 2012 - Religare Health Trust

So, the anticipated third-largest IPO this year will finally be underway. It is none other than Religare Health Trust, aiming to raise $500 million in a initial public offering on the SGX. [Reuters link; Today online link] 

Here are some important details about the IPO that are available at the moment

• $500 million to be raised to reduce debts
• Medical and healthcare assets
• End Sept is the rumored listing period
• Business trust style
• Minimum dividend yield of 8.5% (impressive number but more details required on its sustainability and conditions)
• Assets taken from Fortis Health Care Group; aim to buy third-party assets in future
• Religare Capital Markets, Citigroup, Nomura, Standard Chartered and CIMB are acting as the IPO's bookrunners

Of course for now, details are sketchy and as much as you and I can guess from these few news sources. But on first impression, it does seem somewhat similar to that of Ascendas Hospitality Trust that listed last month in the second-largest IPO this year. Impressive dividend yields but somewhat not a very compelling investment given the IPO proceeds are mainly to service debts. Nonetheless, instutitional response over the next few weeks will give a better indication of its market depth and more details along the way will definitely help to make a better judgement. 

On a side note, it is interesting to note that none of the IPOs that listed on the SGX this year had made a loss on the first trading day. The best performers were Neo Group (Catalist listing) with a first day return of 55% on its offer price and Civmec (Mainboard listing) with a gain of 39%. The worst performer was Ascendas Hospitality Trust with a return of 0% on its first day's closing price.

For more statistics such as the one above on the performance of this year's IPO, do head to the dedicated IPO SG Statistics section of this blog.

Happy and healthy trading!

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