• Market Preview: Singapore shares ended negatively, tracking Wall Street's loss on Friday and investors prefer not holding position ahead of today's Federal Reserve meeting. STI closed down 118.42 points or 3.7% at 3,041.06. The trading volume declined to 1.4 billion valued at S$1.6 billion. The losers outnumbered gainers 593 to 190. Among the hot stocks, Straits Asia Resource rose 7.4% to S$3.35 on the back of soaring coal price and Straits Trading rose 10.9% to S$6.53 as Tecity Group has raised its buyout offer to S$6.50.
• Market is likely to rebound from yesterday sell-down as hopes of another round of Fed fund rate cut increases. During the US 2001 recession, there were three unscheduled cuts in the Fed funds rate by 50 basis points each and all were followed by another round of similar cuts on the immediate scheduled meeting (see Table below). We expect the Fed to cut the Fed funds rate by 50 basis points during this coming Federal Open Market Committee meeting on 29/30 January. Further cut in the Fed fund rate could indicate that the US economy is going down at a more rapid rate or at lease what the Fed thinks the economy would be. If the US and Singapore markets continue to rise on the hope of further rate cut, we are likely to witness selling off after the Fed action.
2001
January February March April May June
3 20 11 15 26/27
Unscheduled -0.50% Unscheduled -0.50% -0.25%
-0.50% 5.00% 4.00% 3.75%
6.00%
30/31 18
-0.50% Unscheduled
5.50% -0.50%
4.50%
July August September October November December
21 13 2 6 11
-0.25% Unscheduled -0.50% -0.50% -0.25%
3.50% 2.50% 2.00% 1.75%
17
Unscheduled
-0.50%
3.00%
Source: US Federal Reserve
• Wall Street: US shares rose after odds increased that the Federal Reserve will cut its benchmark lending rate by half a percentage point this week to prop up the economy. Dow was up 176.72 points or 1.4% while Nasdaq climbed 23.71 points or 1.0% to 2,349.91. According to Fed funds futures, traders see a 86% chance the central bank will cut its benchmark lending rate to 3% from 3.5% on Jan. 30.
• Crude Oil rose US$0.28 to close at US$90.99 per barrel on NYMEX.
Company Highlights
Creative Technology Ltd – Remains profitable with 2Q FY08 net profit of US$7.63m
• Creative Technology Ltd ("Creative"), a computer soundcard and MP3 device manufacturer, posted net profit of US$7.63 million for its 2Q FY08 results, its second profitable quarter in FY08.
• Excluding the 2Q FY07 US$82 million Apple Inc payout, 2Q FY08 net profit saw a YoY decline of 24.5% on falling revenue. Revenue for 2Q FY08 dropped 19.1% to US$262.54 million compared to previous corresponding quarter.
• Creative recently launched a new product in an entirely new category called inPerson. inPerson brings video conferencing to a different level, outside of the boardroom.
• The group targets to further improve their gross margins and achieve overall profitability for its coming third fiscal quarter.
Keppel Telecommunications and Transportation – FY07 profit up 18.8%
• Keppel Telecommunications and Transportation ("Keppel T&T"), an investment and management company, finished its 2007 race with an increase in net profit of 18.8% to S$51.45 million YoY.
• Revenue registered a 10.9% growth to $103.1 million attributed mainly to improved performance in its logistics business segment. Earnings per share rose 17.7% to 9.3 cents.
• The group expects domestic logistics market to grow moderately this year but is optimistic that China's domestic growth outlook will remain strong to provide good backdrop for its logistics operations.
• Keppel T&T recommended a first and final dividend of 6 cents per share tax exempt one-tier, a payout ratio of 64.5%.
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