Tech stocks retreat from early highs, ending year lower

TECHNOLOGY stocks were lifted by a wave of private equity buyouts earlier this year that sent their prices soaring.

But when it became clear that not all the companies would be picked up by buyers, market values retreated from the dizzy highs, with many tech stocks ending the year lower.

Among the highest profile takeovers was that of precision engineering firm MMI Holdings.

MMI was delisted from the Singapore Exchange in July after it was bought for $1 billion by US private equity giant Kohlberg Kravis Roberts & Co.

Meanwhile, Stats-ChipPac was the target of a $2.8 billion takeover bid by Temasek Holdings, which sent its share price sharply higher in March.

When its offer closed in May, Temasek gained control of 83.1 per cent of Stats but fell short of the 90 per cent it needed to take the company private.

Stats was subsequently removed as a member of the blue-chip Straits Times Index but remains listed, although Temasek has suggested it will continue to buy more Stats shares in the open market and try to take it private.

Partly as a result of the boost to its share price from the takeover bid, Stats' market cap swelled 39.8 per cent in 2007 to finish at $3.28 billion.

But other tech stocks did not fare so well.

Chartered Semiconductor Manufacturing saw its market cap fall 24.5 per cent to $2.45 billion, mainly due to a plunge in its share price after it reported a second-quarter loss.

Despite a stronger-than-expected Q3 earnings report in October, the share price has not recovered.

Creative Technology also saw its market value dive. It finished the year worth just $668 million, down 23.2 per cent from a year ago. Meanwhile, electronics contract manufacturer Venture Corp saw its market cap dip 4.6 per cent to $3.51 billion.

Hefty market-value gains for many big conglomerates

FOR large conglomerates, 2007 was a year to remember.

Many saw hefty gains in their market value, especially those with businesses heavily exposed to the booming oil and gas industry.

Keppel Corp, the world's largest builder of offshore oil rigs, saw its market capitalisation swell 48.6 per cent during the year to $20.6 billion.

Its smaller rival Semb-Corp Marine - the world's second-largest rig builder - saw even larger gains. Its market cap soared 68.1 per cent to $8.36 billion.

SembMarine's gains would likely have been even higher if not for a steep fall in its share price in late October, following the company's announcement it had relieved its finance director of his duties after discovering that he had entered into unauthorised foreign exchange transactions worth millions of dollars.

SembMarine's parent SembCorp Industries saw its market cap rise 52.2 per cent in 2007 to $10.3 billion.

Another homegrown conglomerate, Singapore Technologies Engineering, saw its market cap grow 23.3 per cent to $11.2 billion.

The Singapore-listed units of Hong Kong's Jardine group also did well, attracting investors keen to gain broad exposure to Asia's economic growth through the group's wide range of business holdings, including property development, financial services, motor vehicle sales and supermarket chains.

The gains were led by Jardine Cycle & Carriage, whose market cap soared 50.2 per cent during the year to $7.54 billion. Jardine Matheson saw its market cap rise 23.1 per cent to $24.9 billion.
Meanwhile, the market value of Jardine Strategic, the holding company of Jardine Matheson, grew 12.6 per cent to $24.6 billion.

A year of mixed results for property firms

IT WAS a year in which property prices soared and the earnings of property companies surged with them.

But the government's move on Oct 26 to discourage speculative buying by withdrawing the deferred payment scheme for private property purchases led to a steep fall in the share prices of Singapore developers in November and December, wiping out most of their gains earlier in 2007.

Most have not recovered, which means any gains in their market value over the year were lacklustre compared with advances of more than 80 per cent for the largest Singapore developers in 2006.

Among the bigger developers, GuocoLand saw its market value grow the fastest in 2007 - both in dollar and percentage terms.

Its market capitalisation rose from $1.72 billion at the end of 2006 to $5.01 billion at the end of trading yesterday - an increase of almost three times.

By contrast, CapitaLand, the largest developer here, ended the year with a market cap of $17.6 billion, just 2.1 per cent higher than at the end of 2006.

City Developments, the second-largest developer here, saw its market cap rise 11.8 per cent during the year to $12.9 billion.

Keppel Land's market cap rose just 5.6 per cent to $5.24 billion, while UOL Group's market cap rose 4.3 per cent to $3.6 billion. Singapore Land saw its market cap shrink 7 per cent to $3.3 billion.

Some of the smaller developers did turn in big gains. SC Global Developments, for example, saw its market cap rise from $372 million to $956 million during the year.

Overseas developers listed here also saw larger gains. Hongkong Land, a commercial developer in Hong Kong, saw its market cap grow 17.2 per cent to $16.4 billion.

And Yanlord Land, a mainland Chinese developer listed here, saw its market cap rise 47.1 per cent to $6.01 billion.

Banks absent from top gainers list

BANKS were conspicuously absent from the list of top gainers in the stock market in 2007, due to the upheaval in financial markets and the banking sector in the second half of the year.

DBS Group, the largest of the three Singapore-listed banks by loans book, saw its market cap fall 8 per cent during the year to $31.4 billion.

United Overseas Bank (UOB), the second largest of the three, gained 2.6 per cent in market cap to end the year worth $30.3 billion.

OCBC Bank saw its market cap rise the fastest, growing 7.7 per cent to $25.9 billion.

This was in stark contrast with the previous year, when DBS led the banks' gains with a 38.1 per cent rise in market cap, followed by UOB with a 31.7 per cent increase while OCBC lagged, growing just 15.4 per cent.

All three banks' share prices continued to climb in the first few months of 2007. The frenzied buying and selling of properties and stocks at ever-higher prices amid the broader economic expansion that was taking place suggested excellent growth prospects for the banks' main lending business, as well as other activities such as stockbroking and wealth management. Investors piled into banking stocks.

At their peak in May - $24.90 for DBS, $24 for UOB and $9.70 for OCBC - the banks' share prices were respectively 10.2 per cent, 23.7 per cent and 26 per cent above their 2006 year-end values.

But signs of increasing distress in financial markets in June - including the near-collapse of two hedge funds managed by US investment bank Bear Stearns after massive losses linked to sub-prime mortgages there - shook the confidence of investors and the banks' share prices started to wobble.

As the crisis spread from the US housing market to mortgage lenders, banks and other financial institutions outside the US through debt securities backed by these high-risk mortgages, international fund managers sold shares in banks and other financial institutions around the world, causing a steep fall in the share prices of the Singapore-listed banks in late July and early August.

A subsequent recovery proved short-lived. The banks' share prices fell again in November despite relatively strong earnings growth in the third quarter, as investors braced themselves for further write- downs in the value of debt securities the banks hold that have been affected by the turmoil in financial markets worldwide.

Banking analysts now say they expect the banks' core lending business to remain strong in 2008, but say their share prices are likely to remain highly volatile at least until they publish their full-year 2007 results and convince investors that the worst of the financial storm is over.

Record highs, triple-digit falls

CRISIS? What crisis? Although 2007 will go down as the year of the US sub-prime crisis - when ordinary Singapore investors gained an unwelcome but unfortunately necessary understanding of exotic financial terms like 'carry trade', collateralised debt obligations (CDOs) and structured investment vehicles (SIVs) - there was plenty to shout about.



In local currency, the Straits Times Index gained 16.6 per cent while in US-dollar terms, its rise was a healthy 24 per cent. For sure it was a turbulent year in which plunges in the index were common and investors were given rude reminders of how global markets are heavily interdependent - and how the inability of some Americans to pay their mortgages can lead to sharp sell-offs in this part of the world.

There was also China, where concerns about official tightening to curb inflation and prevent a stockmarket bubble dragged stocks lower.

With fears of a US recession constantly hovering in the background, how did the local market manage to turn in such solid returns?

In a word - liquidity. Yes, superior earnings and economic growth played a part. And yes, some of it was because of exposure to China and India's superior growth.

But it was liquidity - created by loose monetary policies, starting with the US Federal Reserve - more than anything else that underpinned the bull market of 2007.

And with the Fed likely to continue bowing to financial market pressure in 2008, liquidity should remain high, underpinning stocks and keeping the ball rolling. Crisis? What crisis?

The year's gainers and losers

Wilmar's fortunes soared on the back of high palm oil prices, but DBS and SIA felt the heat from the slowing global economy

RISING commodity prices were probably best illustrated by the Singapore stock market's top gainer by market value in 2007. Palm oil refiner Wilmar International saw its market capitalisation increase $28.3 billion to $34.4 billion.


Wilmar was easily the year's top gainer in dollar terms, making the company the second-largest on the exchange after SingTel. Wilmar was the 19th largest company by market cap in December 2006. But its fortunes soared on the back of high palm oil prices, fuelled by demand for the raw material in food and alternative fuel such as bio-diesel, after crude oil soared above US$90 a barrel.

SingTel, an index heavyweight and a bellwether for the local bourse, was the second-biggest gainer in terms of market cap in 2007. The stock rose amid the US sub-prime mortgage woes, with analysts lauding it as a defensive counter with above-average returns and below-average standard deviations during volatile times.

SingTel benefited from immigration-driven consumption growth and strong economic activity. It enjoyed double-digit growth at home as the resurgent economy led to more mobile phone sales and higher business demand.

SingTel also has investments in high-growth Asian nations such as Thailand, India, Philippines and Indonesia and in the bigger Australian market through Optus.

Before sub-prime woes reared their head, the Singapore Exchange (SGX) saw a boom in initial public offerings and a flurry of trading activity as the market surged to unprecedented levels. This made SGX the third-largest gainer in terms of market cap. The company announced record earnings as its income from securities clearing and processing fees flourished.

As for 2007's top gainers by percentage terms, a commodity play again topped the list. Palm oil producer Indofood Agri Resources was the biggest gainer in market cap by percentage terms. The other two top spots were taken by penny stocks Memstar Technology and China Auto Electronics

Memstar, a China-based water treatment firm that came about from the reverse takeover of electronics firm Mediastream, made its debut this year.

China Auto Electronics Group, which designs, assembles and makes wiring harnesses and connectors for the automobile industry, was recommended by analysts for its exposure to demand for such products from China's growing vehicle industry.

Turning to 2007's top losers, DBS headed the list for market cap in dollar terms. South-east Asia's biggest bank was singled out by investors as a victim of sub-prime mortgage woes.

DBS made a $70 million allowances for $275 million in CDOs that were exposed to US sub-prime assets. The bank also saw the departure of its chief executive Jackson Tai. A new CEO has yet to be announced.

Singapore Airlines was second on the losers' list in terms of dollar value. Its chief executive Chew Choon Seng had said that the aviation industry might be affected by the slowdown in the global economy brought about by high oil prices and the credit crunch. The liberalisation of Singapore-KL flights has also taken away the virtual duopoly SIA and MAS had, giving budget airlines a chance to cash in on the lucrative route.

Investment company GuocoLeisure, formerly known as BIL International, saw its market cap drop after disposals by a high-level executive. The stock was also among four dropped from the Straits Times Index.

In percentage terms, the biggest loser in market cap was medical equipment manufacturer Sunray Holdings, which had warned of lower sales and net profit for FY 2007. It said that the operating environment remains challenging.

Gems TV Holdings also said that it faces challenges in its business as its earnings fell. Hengxin Technology, another loser, was rocked by management tussles, resulting in the resignation of four directors including CEO Qian Lirong.

Wilmar's amazing rise fronts '07 growth story

Stock market cap up 33.5% in the year; Wilmar left banks behind

The Singapore stock market ended 2007 sharply higher despite the turbulence in the second half of the year, driven by explosive growth in the energy, commodities and marine sectors.


Trading for the year ended yesterday with the total market capitalisation at $797.8 billion, up 33.5 per cent or $200 billion from $597.8 billion at the end of 2006.

Over the month of December, the total market capitalisation of Singapore-listed companies rose 1.1 per cent or $8.3 billion from $789.5 billion at the end of November.

The Straits Times Index (STI) of blue-chip stocks ended the year 16.6 per cent higher at 3,482.30, after rising 1.1 per cent yesterday. For the month, the index was down 1.1 per cent.

A global boom in the demand for oil, food and other commodities saw companies in the traditional and alternative energy sectors as well as shipping and logistics chalk up some of the largest gains in 2007.

The single biggest gainer in dollar terms was Wilmar International, an Indonesian palm oil business that listed here in July 2006 through a reverse takeover. Its market capitalisation rose an astonishing $28.3 billion in 2007 to $34.4 billion at the end of trading yesterday - roughly five-and-a-half times what it was at the end of 2006.

The enormous gain means that Wilmar is now the second largest company listed on the Singapore Exchange, ahead of the banking groups.

SingTel - still by far the largest company listed here - ended the year worth a massive $63.6 billion, after the telecommunications group's market capitalisation rose 22.1 per cent or $11.5 billion in 2007.

The stock market also got a boost from several reverse takeover deals. The largest of these was Indofood Agri Resources, the new entity that emerged after Indofood Sukses Makmur - owned by Indonesian tycoon Anthoni Salim - injected some $390 million worth of oil palm plantations and edible oils and fats refining businesses into Sesdaq-listed CityAxis Holdings.

The backdoor listing - completed last January - and the subsequent doubling in IndoAgri's share price enlarged the market capitalisation of the listed entity from $51.3 million at end-2006 to $3.5 billion at the end of trading yesterday.

A third palm oil group - Golden Agri-Resources - also saw enormous gains. Its market capitalisation grew by $7.95 billion over the year to $10.6 billion - four times what it was at the end of 2006.

Coal mining group Straits Asia Resources saw its market capitalisation balloon from $608 million to $3.4 billion in just 12 months, after it secured new mining licences in Indonesia.

Meanwhile, Hong Kong- based Noble Group, which supplies commodities ranging from coffee and sugar to coal and steel, saw its market capitalisation rise to $6.3 billion, from just $2.65 billion at the end of 2006.

Shipping groups such as STX Pan Ocean, Cosco Corp, and Neptune Orient Lines also saw large gains, as did steelmaker FerroChina.

Notably absent among the large gainers this year were the banks.

As investors around the world struggled in the second half to unravel losses on debt securities linked to sub-prime mortgage loans in the US, uncertainty over the value of such securities held by banks here saw the bank stocks give up most of their earlier gains.

In fact, DBS Group - the largest of the three Singapore-listed banks - saw the largest drop in market capitalisation by dollar value during the year among the stocks listed here. Its market capitalisation fell 8 per cent or $2.7 billion to $31.4 billion at yesterday's close, behind Wilmar's $34.4 billion.

After DBS, Singapore Airlines shed the most weight, its market capitalisation slipping 5 per cent or $1.1 billion to $20.6 billion.

Some $25 billion of the 2007 year-end market capitalisation came from more than 60 new listings during the year, including property, shipping and business trusts.

Of the existing listings, roughly three stocks gained for every one that fell in market cap over the year.

Other major beneficiaries of the global boom in the oil and gas and construction sectors included crane rental company Tat Hong Holdings, which saw its market capitalisation swell from $533 million to $1.73 billion, and marine engineering firm Swiber Holdings, whose market cap quadrupled from $349 million to $1.46 billion.

And in a year that saw trading volumes rise to record highs - sometimes overwhelming the SGX's computer systems - SGX's own market capitalisation soared to $14.3 billion, more than double the $6 billion it was worth at the end of 2006.

Analysts say that stock prices are likely to stay volatile in early 2008, as investors wait for companies to report their 2007 fourth-quarter results to assess the impact of higher oil prices and slowing economic growth in the US on their profits.

Beyond that, many forecast that economic growth in Singapore will remain strong in 2008. This, together with further interest rate cuts expected in the US and Europe, should keep the stock market rising in 2008, albeit at a slower pace than last year, say analysts.