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Stocks; Weak earnings, Greek bailout in the spotlight

24th Feb 2012 The Business Times By R Sivanithy Senior Correspondent 2012 Singapore Press Holdings Limited EARNINGS disappointments and a classic 'buy in anticipation, sell on news' play was the two main features of the past week. Prominent market favourites such as Wilmar International, Genting Singapore and Neptune Orient Lines (NOL) were among those whose shares took a beating after their results were announced, while over in Europe, confirmation of Greece's widely anticipated second bailout brought the sellers out. The outcome was that although the Straits Times Index (STI) managed a bounce of 9.78 points yesterday, it recorded a nett loss of 22 points for the week, its first weekly loss in 2012. But it is still 332 points or 12.5 per cent up for the year. The impetus to buy earlier this year came because of anticipation that European officials would finally stitch together a workable plan to save Greece, the euro and the European Union. Monday's announcement that a deal had been finalised resulted in immediate weakness and this was accompanied by widespread reports of scepticism over whether the plan would work. Many observers now believe that heaping more austerity measures on a nation that is already on its knees will only make matters worse and not better; the country's manufacturing sector has been hollowed out and tourism, which comprises 15 per cent of GDP, is struggling to remain competitive with other destinations in the region. Moreover, Greece is considered the least competitive nation in the eurozone and has the lowest levels of tax revenues to GDP in the eurozone. Whether or not all the authorities have done is kick the Greek debt can further down the road, the pressure on Italy and Spain - two European giants who were next in line to be hit by debt worries - has been eased and worries of a disorderly default have receded. Replacing them, however, at least as far as the local market is concerned, are

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Plantations giant Wilmar's shares took a beating on Wednesday and Thursday after the company reported its earnings. Accompanied by a slew of 'sell' calls from analysts - especially since the stock price had risen sharply in anticipation of good results - Wilmar fell 78 cents or 13.2 per cent over the week to end at $5.12. It weakened for three consecutive days from Wednesday. Perhaps the biggest disappointment came from NOL, which shocked the market with a US$478 million full-year loss compared to a profit of US$461 million a year earlier. As a result, the shipping firm unveiled a US$500 million cost-cutting programme that probably helped ease some of the selling pressure its stock encountered. NOL dropped 10.5 cents or 7.3 per cent to $1.34. Almost all houses called a 'sell' on the stock, one notable exception being Morgan Stanley - which said NOL could make a profit in 2012 and that upgrades could emerge later this year. In its daily report yesterday, research firm Ideaglobal described global markets as being in a state of flux. 'Optimists look at the Greek orderly restructuring and feel that the tail risks (Greek euro exit or major contagion) have been reduced for this year,' said Ideaglobal. 'The bears feel that price action has run ahead of the fundamentals and that oil prices and China are issues as well as the eurozone. Incoming data and events are only leading to the bulls or bears becoming more convinced, and this is producing choppy price action.' Source: The Business Times