The Straits Times Index (SGX: ^STI) lost ground today as it slipped by 0.8% to 3,173. Last week, the USA released positive economic data, which prompted some market observers to view that as a sign that the US Federal Reserve might start quenching its Quantitative Easing Programme. The end of QE is popularly considered to be bad for stock markets and it might appear to some that our local market is dropping on the fears of an end to QE. That might be a plausible-sounding explanation, but we have cautioned before on the futility of trying to find a reason…
The Straits Times Index (SGX: ^STI) lost ground today as it slipped by 0.8% to 3,173.
Last week, the USA released positive economic data, which prompted some market observers to view that as a sign that the US Federal Reserve might start quenching its Quantitative Easing Programme. The end of QE is popularly considered to be bad for stock markets and it might appear to some that our local market is dropping on the fears of an end to QE.
That might be a plausible-sounding explanation, but we have cautioned before on the futility of trying to find a reason to explain every natural wiggle in the stock market. Investors might be better served trying to study businesses instead.
Lest we digress, here are three companies that happened to be stand-out winners.
Golden Agri-Resources (SGX: E5H) was the best performer in the index today with a 2% gain to S$0.52. The palm oil producer posted a 58% year-on-year decline in quarterly profits to US$45m in its recent second quarter earnings release.
The company’s results have been under pressure from decreasing Crude Palm Oil (CPO) prices but it is not something that’s within the company’s control. In any case, Golden Agri’s declining profits from its last two quarters (see its first quarter earnings here) are a reflection of the difficulties that befall companies that are unable to maintain pricing power in their products.
City Developments (SGX: C09) was also amongst the best performers for the day in the STI as its shares went up by 1.1% to S$10.64. The real estate developer released its second quarter results two weeks ago and saw a 16% increase in profit to S$341.4m for the half-year period compared to a year ago.
City Development elected to share the spoils with its shareholders by declaring a special interim dividend of S$0.08 per share. There were no dividends declared for the corresponding period last year.
Despite the strong showing for the first six months of 2013, Kwek Leng Beng, City Development’s executive chairman commented in the earnings release that the company “expects stronger headwinds in the second half of the year” due to property cooling measures in Singapore.
Sysma Holdings (SGX: 5UO) is a big winner outside the index as its shares jumped 24.6% to S$0.355. Shares of the building construction services company jumped up sharply to around S$0.345 very shortly after the trading session for the day started. It prompted SGX, operator of the stock exchange, to issue a “Query Regarding Trading Activity” to Sysma Holdings at 10:27am today.
The aim of the query’s to find out from Sysma Holdings if there’s any previously unknown information that might have resulted in the large increase in share price. As of the time of writing (5:15pm on 19 August 2013), there’s been no response from the company yet.
While the reason for the price-change’s still unclear, it’s also a reminder to investors that the stock market can from time to time, move drastically – sometimes with good reasons and sometimes illogically. It might be better for investors to focus on appraising the business value of the company based upon what’s known.
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