Singapore market – Remain Volatile

• Market Preview: Straits Times Index (STI) dropped 49.87 points to close at 3,000.03, barely holding the psychological 3,000 support point. In fact the index saw an intraday low of 2,984.69 and a high of 3,072.90 points. Volatility resulted from nervous investor's sell-off ahead of the US Federal Reserve's expected interest rate cut later in the day. Trading volume went up to 1.42 billion shares valued at S$1.75 billion. Decliners led rising issues 453 to 249.
• As expected, the Fed cut its Fed fund rate by half a percentage point. Unexpected, the US economy grew at a lower rate of 0.6% in 4Q2007, half of what market is expecting. Concerns over the US economy remain. The US economy was dragged down by the retraction in gross private domestic investments (see Chart), due mainly to the housing problem. The housing problem is likely to drag the private investments down in this and the next few quarters. What the Bush's administration and the Fed is try to do now is to prevent a slowdown or even a contraction in private consumption. Even if they succeed, the effect will only be felt in the second half of this year. There is still very high possibility that we may witness negative GDP number in this or next quarter or both.

• The Singapore economy is at a better shape now compared to the US recession in 2001. There is no excess supply in the residential properties, office space and industrial buildings. Contracts awarded for the construction sectors are likely to achieve a record this year. And the banking sectors are likely to be supported by domestic demand and not being affected by the US subprime problem. Thus, we are likely to see positive Singapore GDP number even the US is entering a recession. While Singapore fundamental remain strong, market is likely to remain volatile due to concerns over the health of the US economy. Buy and hold may not be a preferred strategy now. We advise investor to buy on weakness and sell into strength.
• Wall Street: US shares fell after comments that the two biggest bond insurers will lose their top credit rating, Ambac Financial Group Inc. and MBIA Inc. Both insurers finished down more than 10%. The remark came in the last hour of trading, collapsing the nearly 1.5% gain wracked up earlier from the aggressively interest rate cut by the US Federal Reserves. Dow was down 0.3% or 37.47 points to 12,442.83 while Nasdaq dropped 0.38% or 9.06 points to close at 2,349.00 points.
• Crude Oil rose US$0.11 to close at US$91.75 per barrel on NYMEX.

Company Highlights
Singapore Petroleum Company Ltd. – FY07 net profit hit record high of S$508 million
• Singapore Petroleum Company Ltd. ("SPC"), an international oil refiner and trader, posted all-time record net profit of S$508 million for its FY07 results, a 78.6% jump from FY06.
• Oil refining/retailing activities contributed about 90% of its operating profit but the group sees an increasing growth in its exploration and production business. Refining margin rebounded to US$7 in 4Q07. 3Q07 margin was US$5 as margins took a hit from reduced product demand. Average refining margin for FY07 is about US$7. SPC expects refining margin to remain relatively healthy this year.
• Earnings per share up 78.5% to 98.78 cents and the group is paying a final ordinary dividend of 40 cents per share. Including the interim dividend of 20 cents at mid-year, payout ratio for FY07 is 60.7%. Based on last traded price of $6.10, dividend yield works out to 9.8%.

CDL Hospitality Trusts – registers 65.2% revenue increase
• CDLTH registered gross revenue of S$27.96 million for fourth quarter of FY07, representing a 65.2% increase over the same period last year.
• Full year gross revenue performance improved 61.1% over projections because of a 26.4% growth in H-REIT's IPO portfolio and 34.7% growth from H-REIT's acquisitions of Rendezvous Hotel Auckland in New Zealand and Novotel Clarke Quay in Singapore after its IPO in July 2006.
• Income available for distribution increased 83.4% to S$22.8 million.

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