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Have punters shifted stakes to the gaming tables?
By LYNETTE KHOO
30 March 2011
Have market punters migrated to the casinos? That is one question bugging remisiers these days as they lament the dwindling of trading activities. Some insist that this interest has shifted to the two casinos that opened last year.
One broker noted that there is a current lack of genuine interest in the stock market, for which he estimates that some 70 per cent of market volumes here are generated by the remisiers and traders themselves.
‘Those who have treated the stock market like a casino have moved to the casinos,’ said the dealer who declined to be named. Some of his friends whom he deems as ‘big-time players who can move the market’ are also high-rolling VIPs in the casinos here.
Data from the Singapore Exchange (SGX) and CIMB show that the average securities daily turnover (ADT) marked five conservative months of year-on-year decline after April 2010. The two integrated resorts (IRs) had both opened their doors by then, with Marina Bay Sands opening that month.
The biggest year-on-year fall in ADT was felt in the subsequent months of May and June. In May itself, average daily trading volumes fell 51 per cent year on year to 1.48 billion shares and average daily trading value slipped 21 per cent to $1.76 billion.
This was followed by a rebound in both volumes and values in October and November last year, with trading values jumping by 42 per cent and 46 per cent year on year respectively.
One caveat, however, is that last year’s figures are pitted against a strong second half in 2009 that saw a stock-market recovery from a slump in 2008 during the financial crisis.
The trend becomes cloudier when month-on-month comparisons are used, with ADT higher in one month and down the other month following the opening of the two IRs.
‘No doubt, the IRs are one of the factors . . . not to mention that there was also the World Cup effect that took all the attention away from the market,’ said CIMB research head Kenneth Ng. Besides the World Cup that took place in June-July last year, there was also some profit-taking from an earlier strong rally since the second half of 2009, he added.
According to Kim Eng executive vice-president Tan Pei-San, there does not appear to be any specific correlation as market volumes are driven by many factors.
Much of the decline in trading interest since the second half of last year also stems from market sentiment and the lack of catalysts, added UOB KayHian executive director Chan Tuck Sing.
‘The markets, nowadays, are very driven by external funds rather than domestic players,’ Mr. Chan said. ‘At the end of last year, some funds were talking about reducing weighting here because of good performance a year before, so the relative weighting of Singapore as part of global portfolio declined.’
But one aspect of the ‘IR effect’ seems indisputable - the renewed interest in Singapore-listed Genting Singapore and New York-listed Las Vegas Sands, which have more than doubled in their respective share prices, until the recent market correction wiped off some gains.
At a time when general interest in the market was waning, specific interest in these counters grew, with Genting Singapore still among the most actively traded stock on SGX.
With recent extraordinary events overtaking the ‘IR effect’, investors’ focus has shifted to the nuclear crisis in Japan and recent oil price spikes stoked by the unrest in the Middle East and North Africa.
Mr. Tan noted that such events are bound to have an impact in the short term as market volatility has left participants sidelined.
With the second round of quantitative easing in the United States coming to a close, there is also the question of whether the US recovery will sustain its momentum and provide the support for European debt refinancing, he said.
These risks, however, have been factored in the current valuations, Mr. Ng added, pointing to the Straits Times Index (STI) that is still trading at 10.7 times price-to-earnings (PE) ratio, below the mean historical PE of 13.7 times.
The low valuations could set the stage for PE multiples to expand in the second half, Mr. Ng said. CIMB has maintained an ‘overweight’ position on Singapore, and a year-end STI target at 3,560 points, suggesting upside from yesterday’s 3,056.95-point closing, with Genting Singapore among top stock picks.
As for the ‘IR effect’, Mr. Ng predicts it may soon give way to the ‘burn-out’ effect as casino novelty wears off.