STI set for flat open

This could be a day of consolidation, says IG Markets Singapore.

OCBC Investment Research said:

The pullback on Wall Street overnight could spark profit-taking ahead of the weekend, especially after the recent strong gains (STI was up 0.7% yesterday, also up nearly 10% since 16 Nov).

Sentiment is also likely cautious ahead of the key US jobs report later tonight.

As before, market does look quite overbought and investors could be looking for an excuse to take profit; but we still see any move to take some money off the table as healthy.

On the downside, we peg the immediate support at 3200, though we expect bargain hunting to kick in well before the next 3150 support.

On the upside, 3230 is likely to hold (yesterday’s intraday high was 3231), while the next cap is likely at 3259 (May 08 high).

Meanwhile, high-beta plays (cyclical commodities etc) and other situational small caps are likely to remain in play.

IG Markets Singapore meanwhile noted:

The STI rose 0.7% yesterday to put more distance between itself and the 3200 threshold. Local traders may also react to the latest PMI data which shows a six consecutive month of contraction for factory output.

Among yesterday’s winners was Olam which has slowly been creeping back up to pre Muddy Waters levels, broadly thanks to Temasek’s show of support and firmer sentiment for commodity stocks.

It remains to be seen whether the other big corporate story of 2012, the battle for Fraser & Neave, will lead to a positive outcome for shareholders. The tussle currently centres on who can extend their deadline by the longest, which is of little benefit to shareholders.