Market Report - May 29, 2006

Somehow, the theme for the stock market these days seems to be: play it up and pick up strength in the morning to give a false sense of security, then start to dwindle and crash in the afternoon. This is what's happening for the past few trading days....the afternoons always seem to be worse off than the mornings. The STI seemed to be doing better in the morning, rising about 6 points to hit 2,447 but by closing time, it had shed all its gains to close at 2,439.91, down 5.11 points. Main contributors to the fall were Capitaland and Keppel Land, both of which fell a stunning 32 cents (7.2%) and 34 cents (7.4%) respectively after failing to clinch the IR deal.

The broader market was even worse, there were 358 falls to only 209 rises. Most of the losers were, as predicted, China plays once again. Celestial shed another 8 cents to $1.15, a mere shadow of its former $1.95 self. China pharma plays got battered down too:-

• Asiapharm lost 1 cent (1.3%) to close at 75 cents
• C&O Pharma lost 2 cents (6%) to close at 31.5 cents
• Landwind Medical lost 4 cents (9.5%) to close at 38 cents
• Reyoung Pharma lost 3 cents (10%) to close at 27 cents
• Star Pharma lost 4.5 cents (9,6%) to close at 42.5 cents

This seemingly endless battering down of China plays, and in particular today China Pharma plays, seems to be totally confounding and without basis. The China pharmaceutical industry is booming with many more aged folk requiring medicines and drugs. A lot of monies and effort are being pumped into this industry to ensure that it becomes world-class one day. Asiapharm, one of the leading pharmaceutical companies listed on SGX, plans to go international with their certification in 3 years time (UOB Kay Hian Report). Yet, in a cruel world, they have been dealt a cruel blow and have seen their share prices getting slashed time and again.

My friends, this is a good time to BUY if you think the fundamentals are good. But be prepared to hold it for a long time because no one knows when confidence can be restored. There's still the World Cup Fever to contend with, so don't burn yourself up trying to stay above water.

BioSensors - True Value Emerging ? Be Wary.....

Fans and investors of BioSensors and its range of life-saving stents would do well to heed the company's financials. Their loss of US$22 million is larger than expected and there will be a delay in their BioMatrix CE Mark. Thus, revenues may not flow in as well as expected and the company may not be able to make FY 2007 a profitable year. The stock was further sold down today, shedding a further 9.5 cents to close at 72 cents. More downside is likely given the negative newsflow and downgrades coming through.

Personally, I will not take UOB Kay Hian's TP of $1.29 seriously. I recommend an AVOID until the counter stabilizes or when more positive newsflow comes in.