By R SIVANITHY
SINGAPORE - Another day, another all-time high for the Straits Times Index when it added 8.46 points to 2,838.48, though the real story on Thursday was the resurgent interest in the oil and gas sector as well as China stocks. Keppel Corp, Ezra Holdings, Ferrochina, Longcheer, China Sun, Celestial Nutrifood and Ouhua were among the day's most popular trading targets as rotational punting of the second line kicked into high gear.
A tame overnight session for Wall Street and relative stable sessions for Hong Kong and Japan provided the backdrop to buy, although the broad market's advance-decline score of 224-174 was not as robust as might have been hoped and hinted at possible fatigue creeping into trading.
Brokers said the sudden explosion of interest in China stocks was more a function of a market that was furiously searching for new themes on which to punt than any substantive change to the fundamental view. 'It's all momentum now, people are hungry for new ideas,' said a dealer.
Broking research reports have been the main source of ideas for several months now and so it was on Thursday that the issuance of fresh recommendations helped stimulate trading.
Oil and gas play Ezra Holdings, for example, jumped 20 cents to $3.76 after local broker Kim Eng Securities reiterated its 'buy' with a target price of $5.15.
Referring to recent weakness in Ezra's share price, Kim Eng said, 'Given that the stock has risen 38 per cent since we initiated coverage in early October, exaggerated price movements from profit-taking should not come as a surprise to investors who watch the stock closely as liquidity can be tight.' It based its target price on 11.6 times 2008 earnings.
Heart stent maker Biosensors' shares, in the meantime, rose 3.5 cents to 89 cents after Citigroup issued a 'buy' dated Wednesday - albeit with a 'high risk' qualifier - and a target price of $1.18.
The foreign house used a sum-of-parts valuation to arrive at this figure - cash balance plus US$39 million for Biosensors' base business based on a price-to-revenue multiple of 2, US$547 million for the drug-eluting stent business using a multiple of 30 times FY09 estimated earnings discounted using a rate of 25 per cent, and US$83 million for the company's alliance with Japan's Terumo assuming contributions start in FY08.
In evaluating the possibility of a year-end rally, OCBC Investment said: 'Overall, the outlook for the global environment is less worrying than a couple of months ago when investors were held back by higher interest rate concern and high oil prices. With the benign outlook for inflation, there is growing expectation of a possible cut in interest rate in 2007.
'Against this backdrop, the environment looks favourable for equities. However, with the strong gains of the past two months, further gains for the STI are likely to be capped as the market has priced in most of the positive factors. Interest is likely to switch to the laggards and there could be a potential play into the under-performing tech sector. We continue to like the oil and gas sector as we believe that earnings momentum remains strong for the next few years.'
