New STI off to a sedate start as US worries loom - Jan 11, 2008 (BT)

BackJan 11, 2008

The Straits Times / The Business Times News On SPH

New STI off to a sedate start as US worries loom

Index drops 1% but 3 of the 4 newcomers in it register gains.

By R Sivanithy
Jan 11, 2008
The Business Times

(SINGAPORE) The new- look, slimmer Straits Times Index got off to a subdued start yesterday, dropping 33.46 points or one per cent to 3,311.07 in sympathy with a 1.4 per cent loss in Hong Kong's Hang Seng Index and marginal weakness in the US futures market.

Drumming up interest: Launching the revamped STI and new FTSE ST Index series are (from left) SPH CEO Alan Chan; SGX CEO Hsieh Fu Hua, and FTSE Group CEO Mark Makepeace

All its accompanying 18 FTSE ST indices also closed weaker on their first day, led by the FTSE ST China index, which lost 3.4 per cent.

Interestingly, however, of the four new counters that have been added to the STI, three finished stronger - China property firm Yanlord, palm oil play Wilmar International and SIA Engineering. The fourth, China's Yangzijiang Shipbuilding, dropped 5 cents to $1.84.

Brokers said lingering worries over the state of Wall Street and whether the US market has fully discounted an impending economic slowdown continued to weigh on sentiment here, overshadowing for the time being any interest in the new indices.

Despite Wednesday's bounce on Wall Street, the March 2008 futures contract on the Dow Jones Industrial Average weakened slightly yesterday during Asian trading hours, suggesting a flat or soft opening for US equities on Thursday.

'It's a very quiet, nervy and uncertain market at the moment,' said a dealer. 'No one wants to make a move in case of more selling and everyone is looking at Hong Kong and Wall Street for direction.'

In a Tuesday Investment Strategy report, US broker Merrill Lynch said its US strategist David Rosenberg believes that this year the real economy will catch up with a deteriorating financial economy and that a cyclical bear market for equities will be the outcome.

In a separate report released on Monday, Merrill Lynch said it believes that based on last week's poor unemployment statistics, the US economy has already slipped into a recession.

Morgan Stanley in the meantime, said on Monday that although it believes a first half US slowdown will be mild and short, Wall Street has not fully discounted this yet.

The revamped ST Index now has 30 components instead of 47. Of the 21 stocks dropped from the index, Venture Corp stood out by virtue of a 36 cents fall to $11.14, which brought its two-day loss to 80 cents or 6.7 per cent. Wing Tai slid 8 cents to $2.30.

Of the 18 other indices, the FTSE ST China Index was the worst hit, losing 25.5 points or 3.4 per cent at 717.32. From its base value of 1,000 set on Oct 8, 2007, the China index has now lost about 28 per cent.

The FTSE Mid Cap Index in the meantime, yesterday closed 1.3 per cent weaker while the Small Cap Index lost 1.2 per cent.

All indices were jointly developed by FTSE Group, Singapore Exchange and Singapore Press Holdings to provide investors with comprehensive coverage of the local stock market.