Caution rules as investors await new data

Trading activity moderate, with mixed picture for the region

By Goh Eng Yeow, Senior Correspondent

RISK is out these days and hiding behind the sofa as investors wait anxiously for key earnings reports from the United States and brace themselves for more dampening measures from China.

They did not have to wait long yesterday. The nation's central bank moved to tighten liquidity further by auctioning 24 billion yuan (S$4.8 billion) of one-year bills at a higher-than-expected yield of 1.9264 per cent to attract buyers.

Amid all that, a feeble attempt by the benchmark Straits Times Index to make headway looked doomed from the start. After gaining 14 points in early trade, it tumbled six points before closing 0.9 point higher at 2,912.92.

Penny stocks came under selling pressure, with the FTSE ST Catalist Index - tracking 60 such shares - falling 1.3 per cent.

At least trading activity stayed moderate, with 1.89 billion shares worth $1.57 billion changing hands.

Elsewhere, the picture was equally mixed. Tokyo's Nikkei-225 Index fell 0.83 per cent while Taipei's Taiex Index lost 1.07 per cent and Sydney's S&P ASX 200 Index was down 1.02 per cent.

But Hong Kong's Hang Seng managed to arrest early losses to end 1.02 per cent higher while Shanghai edged up 0.3 per cent.

This is because of a rebound in mainland banks and property counters after China's banking regulator denied speculation that it might try to impose loan quotas on big lenders to cool the red-hot economy.

Still, the cloudiness in the big picture did not deter investors from picking up shares that are riding on the wave of mergers and acquisitions now sweeping across the market.

CapitaLand rose eight cents to $4.36 on a volume of 42.1 million shares. It had announced it was expanding its footprint in China by buying US$2.2 billion worth of choice mainland properties from Hong Kong-listed Orient Overseas International Limited, which is controlled by the family of former Hong Kong chief executive Tung Chee Hwa.

The deal was backed by several research houses. Deutsche Bank, for example, noted that it would allow CapitaLand to redeploy a big part of its surplus capital at reasonable margins.

But sounding a note of caution, one trader said that CapitaLand had cut a deal amidst a growing debate over the existence of a real estate bubble in China.

'CapitaLand can get it very right or very wrong, given the mixed signals from the China properties market,' he added.

The Singapore Exchange fell nine cents to $8.27 after reporting that second-quarter profit fell 3.9 per cent to $71.75 million.

Reflecting concerns over the 'exodus' of China plays from the local bourse, Kim Eng Research said SGX might face a 'more challenging task to improve new and existing listings to pre-crisis levels', with more S-chips seeking alternative listings.

Mainland shoemaker Hongguo International jumped 11 cents to 43 cents on a volume of eight million shares after announcing that Info Giant Investments was making an offer of 43.9 cents a share for the company.

Source: Straits Times, 20 Jan 2010.