Deep recession fears slam Wall Street

NEW YORK - Stocks tumbled to 5 year lows on Wednesday as investors grappled with an increasingly dire outlook for the global economy following a raft of disappointing profits and outlooks from major US companies.

Plummeting commodities prices sent energy and materials company shares sharply lower. Exxon Mobil was the top drag on the Dow, down almost 10 per cent.

A plunge in emerging market assets and widespread deleveraging were seen as further signs the credit crisis that has plagued the United States and Europe has begun to hit developing countries. Stock markets around the world have fallen sharply over the last two days.

'The themes remain the same: concerns about global recession, deflation and concerns about significantly reduced worldwide demand,' said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.

The Dow Jones industrial average fell 514.45 points, or 5.69 per cent, to 8,519.21. The Standard & Poor's 500 Index dropped 58.27 points, or 6.10 per cent, to 896.78, its lowest level since April 2003.

The Nasdaq Composite Index was down 80.93 points, or 4.77 per cent, at 1,615.75, closing at it lowest level since June 2003.

Source: Singapore Business Times - 23 Oct 2008

It has been almost a month since I last covered Capitaland. Basically there was nothing much to mention except that it was on the way down.

However, Capitaland’s recent chart seems to show a sign of slow down in its downward pressure. A comfortable support seems to have settled at 2.28. This is good news for long term investors to bottom fish but please be aware that even though the support seems to be at 2.28, it might be caught in the side way movement for a while so as to gain momentum before it moves on.

If the near term resistance at 3.28 can be convincingly broken through, and its price maintains above 20-day SMA or better still above 50-day SMA, more upsides will be expected and it would then be more likely that Capitaland has successfully bottomed out.

On the contrary, if Capitalnd were to give up 2.28, it will move down to test the psychological support at 2.00.

Wall Street up on hopes of credit recovery

NEW YORK - A rising wave of optimism lifted Wall Street on Monday, propelling the Dow Jones industrials up more than 400 points on more signs of a reviving credit market and support from Federal Reserve Chairman Ben Bernanke for further steps to aid the economy.

All the major indexes finished with gains of 3 per cent or more.

Investors who had sold furiously in recent weeks in response to immobile credit markets became more optimistic as bank-to-bank lending rates eased further. There's also less demand for ultra-safe Treasury bills, another sign that the credit markets are gradually returning to a healthier state.

The improvement in lending rates helped temper concerns that tight credit will contribute to a prolonged recession, but Mr Bernanke still warned that the economy is likely to be 'weak for several quarters, and with some risk of a protracted slowdown.'

But he also told the House Budget Committee that a fresh round of government measures might help ease the country's economic weakness.

There were no details but the White House said it was open to ideas that Congress might put forth.

Wall Street was also sifting through the first of hundreds of earnings reports expected this week, seeking clues about future business conditions. Among those reporting, oilfield services provider Halliburton Co topped estimates, and CEO Dave Lesar told investors and analysts in a conference call, 'We expect that any major macroeconomic disruptions will ultimately correct themselves.'

Trading was orderly for much of the day, but the final hour again saw frenetic activity, this time to the upside, with the Dow rising nearly 140 points in the last 25 minutes.

The market's tone was clearly better than during the previous two weeks, when investors' heightened anxiety about credit markets and the economy sent stocks plunging.

The relative calm in Friday's session, when the Dow fell 127, and Monday's trading, had more investors feeling confident that the worst of the market's losses was behind it.

Still, with back-and-forth trading a hallmark during recoveries from plunges in the past, analysts and investors were also expecting that Wall Street would be subject to volatile price swings for some time.

The Dow rose 413.21, or 4.67 per cent, to 9,265.43. The blue chips' gain were in line with a 4.68 per cent gain registered Thursday, when the Dow jumped 401 points.

The rally marked the Dow's 23rd triple-digit move in 26 sessions.

Most sessions have brought losses, however, with 11 of the past 14 showing declines.

Source: Singapore Business Times - 21 Oct 2008

It looks more like the end of the beginning

A PROMINENT businessman recently said of the US$700 billion US Treasury bailout plan that it didn't mark the beginning of the end, but rather the end of the beginning.

He meant, of course, that the US government's plan to buy toxic bank assets announced a fortnight ago marked only the end of the first phase of the bear market and that there was plenty more pain to come. Judging by the way trading went this week, he was probably right.

The Straits Times Index started the week with a two-day, 180-point burst following news of coordinated interest rate cuts, liquidity injections, bank nationalisation programmes and deposit guarantees by European governments/central banks that gave fresh hope that the credit crunch might soon be eased.

The reversal started on Wednesday, possibly because conditions in credit markets have not improved dramatically but also because investors have apparently cottoned on to the fact that a painful recession looms, the full effects of which may not have been priced in yet.

As stated in this column last week, a big reason for this is that Wall Street has probably lagged the rest of the world on the downside all throughout this year, and is only now starting to play catch-up.

Until it does, conditions are likely to stay as volatile as they've been over the past few months, with 3-5 per cent daily moves becoming increasingly frequent.

As a result, the STI promptly lost all of that 180 points gain, its 72.69 points plunge yesterday taking it to 1,878.51 or a nett loss of 70 points or 3.6 per cent for the week.

Among the worst hit of the index stocks was SingTel, whose price has tanked along with the Australian dollar.

Over the course of the week, SingTel lost 27 cents or 10 per cent to finish at $2.50.

China shipyard Cosco Corp was another STI member to bear the brunt of selling pressure because of several concerns, among them the strength of its order book.

However, two houses, JP Morgan and Kim Eng Research, stuck their necks out on Thursday with strong 'buys'.

Cosco yesterday fell six cents to 75.5 cents, bringing its loss to 34.5 cents or 31 per cent for the week.

Bank stocks held up reasonably well yesterday after news that the government will guarantee all deposits.

However, they were heavily sold off in the final hour - DBS lost 84 cents at $13, UOB 24 cents at $14.76 and OCBC 22 cents at $6.10.

Citi Investment Research said earlier in the week that it is time to sell the banks because Singapore's bear market is likely to continue until the point of maximum GDP contraction, projected to be in mid-2009. 'We see 20-25 per cent downside to consensus 2009/10 estimates,' said Citi.

Elsewhere within the finance sector is the Singapore Exchange, which reported a 35 per cent first quarter profit drop mid-week that, predictably, led to 'sell' reports being issued. The stock yesterday lost 23 cents to $5.31.

On the state of the US economy, BCA Research said that 'the worsening economic outlook is sustaining a high level of risk aversion on the part of lenders and investors'.

'Of course, this creates a self-fulfilling outcome as frozen credit markets and falling equity prices directly undermine the economy. The authorities fully understand that they must break this vicious circle. For its part, the Fed has begun to rapidly expand its balance sheet, and it is under pressure to cut interest rates again soon.' it said.

Source: Singapore Business Times - 18 Oct 2008

Wall Street slips as recession worries nag

* Housing starts, consumer confidence fuel early gloom
* Honeywell cuts outlook, leads manufacturers lower
* Dow down 1.4%, S&P down 0.6%, Nasdaq down 0.4%

NEW YORK - US stocks fell on Friday on weakness in manufacturing and financial stocks after bleak data on consumer confidence and construction, but the Dow still snapped a disastrous three-week losing streak with its best weekly gain in more than five years.

It was a week marked by extreme volatility, and Friday's trading was no different, with stocks swinging back and forth between positive and negative territory. A big afternoon rally was snuffed out in the last hour of trading as uncertainty took hold before the weekend.

A rally in energy stocks fizzled late in the day as oil prices settled off their highs for the session.

The Dow Jones industrial average fell 127.04 points, or 1.41 per cent, to 8,852.22, while the Standard & Poor's 500 Index dropped 5.88 points, or 0.62 per cent, to 940.55. The Nasdaq Composite Index slipped 6.42 points, or 0.37 per cent, to 1,711.29.

For the week, the Dow rose 4.8 per cent, its best week in 5-1/2 years, while the S&P 500 had its best week since February with a gain of 4.6 per cent. The Nasdaq rose 4.1 per cent for its best week since early August.

The week featured one of Wall Street's best days ever on Monday, followed by it worst day since the 1987 stock market crash on Wednesday.

On Friday, the government's housing report showed permits for new homes sank to a nearly 27-year low in another sign of deterioration in housing. The Dow Jones home construction index lost 2.2 percent.

Source: Singapore Business Times - 18 Oct 2008

Market ends sharply higher on bargain hunting and oil

NEW YORK - Stocks leaped on Thursday, as investors snapped up beaten-down shares the day after Wall Street's worst day since the 1987 stock market crash while consumer companies gained as the price of oil fell.

Discount retailers, such as Wal-Mart and healthcare companies drove indexes higher as investors bet their profits will prove more resilient in an economic downturn.

Energy companies and materials, which were mauled in a broad sell off on Wednesday, rebounded, even as the price of oil fell below US$70 a barrel.

In another extremely volatile session, the Dow swung in a range of 700 points. Traders said monthly options expirations may have contributed to the swings.

Stocks had fallen sharply early in the session, after data showed factory activity in the Mid-Atlantic region fell to an 18-year low this month, fueling fears of a severe recession.

The Dow Jones industrial average jumped 401.35 points, or 4.68 per cent, to 8,979.26. The Standard & Poor's 500 Index climbed 38.53 points, or 4.24 per cent, to 946.37. The Nasdaq Composite Index was up 89.38 points, or 5.49 per cent, at 1,717.71.

US crude futures settled more than 6 per cent lower, ending below US$70 a barrel after weekly government inventory data reflected sliding demand.

Source: Singapore Business Times - 17 Oct 2008

When silence was not golden
By WONG WEI KONG
Singapore Business Times - 16 Oct 2008

COSCO Corp Singapore truly became a penny stock yesterday, with another tumble in its share price in what was an acute crisis of confidence.

The stock fell 20.5 per cent or 20.5 cents to 79.5 cents yesterday - this coming after it crashed almost 17 per cent on Tuesday.

That slide will likely be checked, now that Cosco has come out to address some of the concerns the market had over the company.

But the question remains why the company waited so long to clear the air, and did so only after it was queried by the Singapore Exchange.

Tuesday's fall was attributed to a downgrade in Cosco's target price by Credit Suisse to 55 cents from $1.20, with an 'underperform' rating. Credit Suisse said in a report that it expects Cosco shares to drift lower on concerns over shipbuilding demand, risk of order cancellations and delivery delays.

The view that the current credit condition could squeeze demand for new shipbuilding and lead to order cancellations by clients hit by tighter credit lines is one that was widely held, especially after news of Cosco's Norwegian client MPF filing for bankruptcy.

Cosco declined, however, to address these issues when presented with the chance on Tuesday, when the media asked the company to comment on the market's concerns. It was an opportunity missed, and one with costly consequences for its shareholders. Not surprisingly, given the lack of any assurances from the company, the stock continued its slide yesterday on heavy volumes, as more joined in the downgrades.

Why was it so difficult for Cosco to provide timely assurances to the market? Other companies had provided updates and assurances on their businesses when there was a need to. When the tainted milk scandal broke out in China, Chinese food-related companies here issued statements to tell investors what the impact, if any, was on their operations. Similarly, when the Sichuan earthquake took place, listed companies with operations in the region all issued statements to update shareholders. So too when hurricanes struck the US.

In sharp contrast, FSL Trust Management Pte Ltd, the trustee-manager of First Ship Lease Trust (FSL Trust), took the initiative to assure investors after its units also fell in heavy trade. It said yesterday that FSL Trust continues to receive steady lease rental payments from its eight lessees, has a robust set of risk management protocols and is in regular dialogue with its lessees with regard to their credit-worthiness, and reaffirmed its earlier distribution per unit guidance.

Cosco's reticence is all the more surprising given that the lack of communication from the company was cited as a key factor for the market's loss in confidence. Said Credit Suisse in its report: 'Inadequate disclosure on dry bulk newbuild schedule and no announcements on successful delivery of dry bulk vessel to customer to-date (against 10 planned deliveries in 2008 and 41 vessels in 2009) heighten our concerns on execution risk.'

There was clearly an information gap regarding Cosco. As one investor noted in an email to BT, CIMB also made a call on Cosco on Tuesday, the same day Credit Suisse issued its downgrade. But the two calls were poles apart. In opposition to Credit Suisse, CIMB said: 'Key catalysts for Cosco include better-than-expected offshore and conversion orders coupled with falling steel prices. We maintain a 'buy' call with a target price of $2.89.'

The sharply contrasting calls indicated that Cosco had given little guidance to the market, leaving analysts to make their best or worst assumptions. The company's silence simply fanned speculation that bad news may lie just around the corner.

Cosco's statement last night may arrest the fall in its share price. But it may have come too late. Two days of fear-driven selling have destroyed a huge chunk of shareholder value, and more importantly, shattered trust in the company. Rebuilding credibility may prove a major challenge for Cosco.

Wall Street plummets as data feeds recession worry

NEW YORK - Wall Street had its worst day since the 1987 stock market crash on Wednesday, as bleak economic data fed worries that all the efforts to unlock credit markets may not stave off a severe recession.

Federal Reserve Chairman Ben Bernanke added to those concerns when he said the economy faced a 'significant threat' from paralysed credit markets.

Dismal monthly US retail sales set the tone for the session, dropping the most in more than three years, while a measure of New York state manufacturing hit its lowest level since the index started in 2001.

The Nasdaq has now wiped out all of its gains from Monday's 11 per cent rally, while the benchmark S&P 500 is up only about 1 per cent from Friday's close.

Wednesday's data intensified recession fears, as did the Federal Reserve's Beige Book report, which showed economic activity weakened across the United States in September as businesses revised capital investments and consumers curtailed spending.

Shares of companies considered economic bellwethers, such as industrial conglomerate Caterpillar Inc, fell sharply. Caterpillar's shares slid over 11 per cent.

Fears of recession knocked commodities lower, with Exxon Mobil tumbling 14 per cent as the price of oil fell.

The Dow and the benchmark S&P 500 suffered their worst one-day percentage drops since 1987.

The Dow Jones industrial average slid 733.08 points, or 7.87 per cent, to 8,577.91, while the Standard & Poor's 500 Index tumbled 90.17 points, or 9.03 per cent, to 907.84.

The Nasdaq Composite Index sank 150.68 points, or 8.47 per cent, to 1,628.33.

Source: Singapore Business Times - 16 Oct 2008