Monday, May 29, 2006

Predictions for the STI and SGX stocks this week

With the Dow Jones up about 67.6 points last Friday and the NASDAQ up 12 points, it would seem that sentiment would at least be mildly positive. After all, the STI being beaten down nearly 10% in 2 weeks is a pretty serious business, and even though analysts may scream "healthy correction !", it has not managed to calm investors' jitters and fears about an impending meltdown.

My prediction is for the STI to trade sideways this week. The last close was at 2,445.02 points last Friday, up 40.57 points. It will probably trade in the range of 2,420 to 2,480 for this week, unless some positive news about the economy of employment comes out to break the resistance. Oil prices have dipped marginally but are still above the psychologically high US$70 level (brent crude oil price was US$70.56, down a mere US$0.15), so I predict this will act as a "buffer" to weaken sentiment and prevent the STI from breaking new ground.

News of the IR announcement that Sands had won the bid, instead of hot favourites Keppel Land and Capitaland, may also bring about adverse reactions to their share prices. The news that Sands had won the bid had caused Sands' share price to soar US$5.96 (9.4%) to US$69.63 on the NYSE. My take is that Keppel Land and Capitaland might suffer at least a 5% drop in their share price due to the strong run-up prior to the announcement of the IR winning bid. This would imply a drop of about 22 cents for Capitaland and a drop of about 23 cents for Keppel Land. Other property counters might be boosted however, by the news of the IR bid win, as this means that property prices would most likely trend upwards from now till construction begins.

Play should still be heavy on China stocks, which has seen recent strong profit-taking. Many good China stocks were sold down in the last 2 weeks to reasonable valuations. While it is true that China companies generally trade at a discount, some companies with compelling growth prospects and a good business model should be allowed to stand out, and their share prices would slowly trend upwards to reflect increased consumer confidence.

Update on Mediaring's Hostile Takeover of Pacific Internet

The directors of Pacific Internet have unanimously rejected a hostile takeover from Mediaring. Mediaring had initially offered US$8.25 per share to acquire Pacific Internet but the directors felt that the offer was "financially inadequate". Currently, Mediaring has a 4.9% stake in Pacific Internet and Vantage Corp. has also reiterated that it would not accept Mediaring's offer as it values Pacific Internet's shares at US$15 per share.

This leaves Mediaring high and dry as the recent share price run-up was due to the release of the news of their impending takeover of Pacific Internet. Now that the deal has most probably fallen through, we have to wait and see what Mediaring's next move would be in order to determine the future of the company's strategic direction. Possibilities include a higher offer than US$8.25/share or an abandonment of the takeover offer. I will be watching the action closely and providing my opinions on the outcomes.

Abu Dhabi's Aabar buys Singapore's Pearl Energy

It is now official: Pearl Energy has been fully acquired by Aabar Petroleum Investments Co., and will become a fully-owned subsidiary when it gets delisted on the Singapore Exchange. This ends the spectacular run for this counter since it was listed on SGX on 20 April, 2005 at 70 cents per share. The company has seen much volatility in its share price but not before it rocketed to a high of $1.00+ on discovery of oil in several wells. The final straw came when Aabar offered to buy over its shares, and propelled the share price to a high of S$2.05 before settling at S$1.95 (the shares are now suspended). I would have thought that Pearl Energy's price could have gone even higher had they remained listed on the SGX, but I guess we will never be able to see that happen now. :-)

No comments: