SG Mkt 080707

Poems Dealing Department Market Focus 12,745.88 Research Commentary 7 July 2008 Index name STRAITS TIMES INDEX HANG SENG INDEX SHANGHAI SE COMPOSITE IX ALL ORDINARIES INDX NIKKEI 225 KUALA LUMPUR COMP INDEX DOW JONES INDUS. AVG NASDAQ COMPOSITE INDEX FTSE 350 INDEX Local Market  Index close 2,892.54 21,416.73 2,669.89 5,170.00 13,237.89 1,134.14 Index Change 12.09 173.95 -33.64 76.00 -27.51 -19.56 Public Holiday Public Holiday Index Change (%) 0.42 0.82 -1.24 1.49 -0.21 -1.70 2,797.00 -34.60 -1.22 Singapore shares were slightly higher at midday as the Dow's overnight rebound prompted buying of select stocks, although investors remained cautious following a fresh spike in oil prices. High oil prices stoked fears of global stagflation, a period of slow or no economic growth and high prices. Weak data on jobs and services in the United States provided no relief to the market. Stock Snippets (Local)  FerroChina off 1.8% at S$1.07 as market weakness, lingering concerns about high iron ore prices eating into galvanized steel coil maker's margins keep stock trapped in sustained downtrend since May. Margin erosion fears further raised last month, when Chinese steel mills agreed to pay Australian miners substantially more for iron ore this year. But DMG, which has Buy call with S$2.30 target, says ultimate impact may not be as severe as feared, as talk of higher prices for iron ore supplies had been floating around for a while; FerroChina has always been able to pass on bulk of any raw material price hike to customers. Still, share price likely to remain depressed in near term. Healthway Medical Corp down 33.3% on robust volume at S$0.24 as investors regard valuations as excessive and eye with caution company's plans to use bulk of IPO proceeds to repay debt. IPO price of S$0.36 translates to historical P/E of 27.5X. Adds use of S$20 million out of S$32.3 million net proceeds to repay bank loans is negative; Orderbook suggests stock may hold at around S$0.235 for time being.  US/Europe News  Crude oil rose for a 2nd week to record levels in New York as investors purchased commodities as an alternative to flagging equities markets. Oil is up 3.6% this week and has increased 19 out of 27 weeks this year as money managers bought crude futures rather than U.S. stocks.  European banks may need to raise between 60 billion euros and 90 billion euros to keep their financial ratios at current levels amid a decline in credit markets, according to Goldman Sachs. Regulatory pressures and a sharp turn in the European credit cycle are the two main causes for concern for bank investors. Outlook  Four weeks ago on June 9, this column predicted that the 'buy the dips, sell into strength' trading strategy that worked well throughout March- May would be severely tested in the forthcoming weeks. Europe was unable to find any firm footing. All its markets plunged alarmingly by an average of 1.5%, making Thursday's modest US bounce look very much like short-covering ahead of the long weekend. Unemployment rate is in a decisive uptrend, which will progressively weigh on consumption. Disclaimer: Note this is not a buy/sell call. Investors are to make your own independent decisions and consult your own professional advisers when in doubt. Financial investment can involve huge losses. Prepared by Wee Meng Hui *Poems Dealing *