Singapore Markets Morning Briefing - what you need to know for Mon April 30, 2012

Coming from a volatile week, the STI is not expected to show significant climb with the upcoming holiday likely to affect momentum.

OCBC Investment Research said:

Despite the firmer Wall Street close Friday, we are unlikely to see any significant rise in the STI, especially ahead of the holiday tomorrow.

We further note that the current interest continues to be focused on speculative plays, especially the penny stocks; hence giving rise to concerns that the market may appear to be “frothy”.

As such, the index could continue to face stiff resistance in trying to clear the 3000 psychological hurdle.

Having said that, any pullback towards 2950 could entice some buying interest.

IG Markets Singapore meanwhile noted:

Asian bourses face a choppy week as a slew of public holidays across the region may break up market momentum.

China and Japan are among the markets closed today while Labour Day is widely celebrated across the region tomorrow. But for those markets open today there are few leads to go on from Friday night’s Wall Street and European sessions.

Last week did finish on a positive note despite some bearish tones from a Spanish downgrade and some weak economic data namely US GDP figures which missed the mark.

This sort of setback would have traders running for cover but the Dow Jones Industrial Average and the S&P 500 ended up 0.2% higher while the NASDAQ climbed 0.6%. Because softer economic data is peppered with the prospects of more central bank liquidity no wide scale panic set in about the strength of the recovery from the world’s biggest economy.

In these times even the downside has an upside. But bulls were also taking heart last week from the strong US corporate earnings which is not just about Apple.

The STI had a fairly volatile week although Friday saw some calm return as the index stayed unchanged. With a public holiday tomorrow trading volumes are expected to be light.

But last week we saw unusually high trading volumes in a few penny stocks which seem to operate in their own little world oblivious to the macroeconomic factors affecting the blue chips.

The allure of these stocks, which often see wild swings in the share prices, is a hard habit to break. But much of the excitement is created by a handful of traders who ramp up the share price, watch it rise further as innocent investors come on board and then dump the stock.