Penny stocks dominant as STI goes up

Rotational playing of penny stocks was perhaps the dominant theme of yesterday's session, even though the Straits Times Index (STI) managed a 14.85-point rise to 3,145.29.

Dollar volume has been on the downtrend in recent sessions, from the average of $1.5 billion a day last week to just over $1 billion now. It is better than last year when it regularly dropped below $1 billion, but it is nonetheless a downtrend worth keeping an eye on.

Yesterday, turnover amounted to 2.6 billion units worth $1.14 billion for an average of $0.44 per unit. Excluding warrants, there were 256 rises versus 204 falls.

The rise in the index came in response to a rebound in the Dow futures and a firm closing for Hong Kong. Banks have been instrumental in moving and supporting the index throughout the past year and so it was the case yesterday, with all three lenders ending firmer.

In total, gains in DBS Bank, United Overseas Bank and OCBC Bank added about nine points to the STI.

The real action, however, was in the second and third lines where brokers, possibly keen to exploit the surge in volume before it tapers off, spent the day running through the list of low-priced issues.

Such was the urge to switch to new names that Tuesday's most active stock, Vashion Group, for example, did not feature at all in the top 20 actives. Its place was taken by Noble Group, which ended $0.005 higher at $0.225 on turnover of 88.7 million.

Vashion, which traded almost 128 million shares on Tuesday, closed unchanged yesterday at $0.004 with 3.9 million done.

While we won’t know for some time whether this exuberance will be justified, judging by equity gains since the US election, the market is clearly overweight on hope. Natixis Global Asset Management’s chief market strategist David Lafferty

Shares of Venture Corp ended $0.24 lower at $10.98 on volume of 1.7 million. They had shot up $0.44 on Tuesday, drawing a query from Singapore Exchange (SGX). Venture has replied it did not know of reasons for the rise.

SGX yesterday issued two queries. They were to property developers Hong Fok after its stock rose $0.065 or 9.2 per cent to $0.775 on volume of 5.2 million, and to Global Logistic Properties after the stock gained $0.06 or 2.24 per cent at $2.73 with 26.5 million shares done.

In the commodities sector, Macquarie Warrants (MW) in its daily newsletter said, for Wilmar International, a 30 per cent share price rally alongside a rebound in palm oil prices, has now given way to an 8.4 per cent drop over the past three weeks.

"Macquarie Equities Research (MQ) attended the 2017 Palm and Lauric Oils Price Outlook Conference (POC) and published a research report yesterday with review on topics discussed during POC 2017. Overall, the speakers on Day 1 are cautious on the 2017 Crude Palm Oil (CPO) price outlook," noted MW, adding that MQ also shares the same view.

Natixis Global Asset Management's chief market strategist David Lafferty in his latest Capital Markets Note "Hope vs Reality" ran through various scenarios involving the Trump administration's hoped-for fiscal stimulus that Wall Street has been banking on, noting that whatever is finally announced may take time to push through legislature before approval.

"While we won't know for some time whether this exuberance will be justified, judging by equity gains since the US election, the market is clearly overweight on hope," said Mr Lafferty.

"We expect a market correction at some point in 2017. This is hardly an outlier prediction: historically, market corrections happen almost every year (if defined as a 10 per cent or greater peak-to-trough loss).

"Our only point is to isolate a likely proximate cause; that is, a failure in implementation of Mr Donald Trump's stimulus or the offsetting risk that it will be undone by more restrictive monetary policy.

"Simply put, the market has gotten ahead of itself by pricing in too much optimism."

This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts