BT: Has the bull run reached its peak? (21 Apr 2007)
Has the bull run reached its peak?
By TEH HOOI LING
SENIOR CORRESPONDENT
I'M sure you don't need anybody to tell you this: The market is very hot now. How hot? Well, don't get too happy if your stocks have gone up by ONLY 20 per cent so far this year.
This would mean that your stocks have underperformed the market. The median price appreciation of all the stocks listed on the Singapore Exchange is 24.8 per cent between the beginning of 2007 and now.
The average - pulled up by the likes of Baker Technology, Lottvision, Showy International and Shanghai Allied Cement which have risen by more than 500 per cent each - is a whopping 40.9 per cent.
Eighty-one stocks, or 11 per cent of the market, have seen their prices doubled or more in less than four months. Some 25 per cent of the market, or 187 stocks, have surged 50 per cent or more. In all, 603 stocks have advanced and just 92 have declined.
Compared with the end of 2005, the median and average increases in all SGX-listed stocks are 52.8 per cent and 95.7 per cent respectively.
About a third of the market has more than doubled. Yongnam Holdings is the biggest gainer during that period - it's a 13 bagger in less than 16 months. It is followed by Nylect Technology, up by 1,290 per cent, and Baker Technology, up 1,136 per cent.
And as of yesterday, 130 stocks or nearly 18 per cent of the market are trading at their one-year highs. These include companies like Singapore Airlines, SMRT, Tan Chong, UOB Kay Hian, LC Development, Eng Wah Organisation, and so on.
Flashback
In this column in October 2005 - which was two-and-a-half years after the market started climbing from its trough in March 2003 - I noted that the rally was confined to only a select group of stocks. At that time, more than 70 per cent of all stocks were still trading at less than half their peak prices of the last 10 years.
'By contrast, in early 1996, some 70 per cent of stocks were trading in the top half of their 10-year price range. And on average, stocks were then trading at 60 per cent above their lowest levels.
'With that perspective, the market performance we have thus far is not quite the same as the bull runs we have seen before. In the super-rally of the first half of the 1990s, one could simply pick any stock and make a bundle. Rumours were the fuel for the stocks' ascent.'
I posited two theories at that time. 'One: the old type of bull is now an extinct breed. The factors which could have led to the death of the old bulls may include the fact that the world's economies have evolved in such a way that more than half of Singapore firms no longer have a fighting chance in today's knowledge-based, globalised and highly competitive market place.
'As investors are more discerning now, they realise today's economic realities and are only going for the fundamentally good stocks. Furthermore, the lessons learnt, and the lingering scepticism and loss of confidence from the crashes of 1997 and 2000 are not forgotten.
'The second theory is the direct opposite of the first one: that the bulls of old are still alive and kicking. If that's the case, a lot more stocks will have to play catch-up.'
Towards the end of the article, I noted that at that time - October 2005 - there were 48 stocks at their one-year highs, versus 40 stocks at their one-year lows.
It was a reversal from the beginning of September when one-year lows outnumbered one-year highs by 91 to 29.
Traditionally, one way to measure the strength of a trend is to compare the number of stocks posting new 52-week high closing prices with those posting new 52-week lows. In a strong uptrend, many stocks are likely to post new high prices, while relatively few are likely to be selling at new lows for the year.
Based on that, I concluded: 'So perhaps we can expect better things to come - not necessarily in terms of the STI hitting new highs, but perhaps more of the second tier market. That would prove to us that the old bulls that we knew are still well.'
Maturity of the bull
Indeed since then, as noted earlier, a wider segment of the market has participated in the bull run.
This is proof that the old breed of bulls is still very much alive and well. A few factors would account for the return of the bulls as we know them.
One, the very high liquidity in the system. Two, a robust economic backdrop with lots of businesses going around for all. Three, some companies have improved their competitiveness and those that don't make it become targets of reverse takeovers.
So if what we are seeing is the bull of old, then it will presumably go through the same life cycle as the previous ones. Now, let's try to ascertain how mature the current bull is.
From the table, you can see that as the bull in the early 1990s progressed, more stocks would scale new heights.
What we have seen in the market in the last two months is reminiscent of the two months between February and April 1993.
Then, the proportion of stocks trading within 10 per cent of their 52-week highs increased to 60 per cent by early April from 43 per cent in February.
Similarly today, the proportion of stocks trading within 10 per cent of their one-year highs is just over 60 per cent. This is up from 49 per cent two months ago.
In terms of the percentage of stocks which are benefiting from the bull market, we have already surpassed even the peak of 2000. During the biggest point of the dotcom bubble, only 24 per cent of the market was trading within 10 per cent of their one-year highs.
So what we are seeing today is the 1993 variety. Back in 1993, the two months following April saw even stronger buying momentum which led to a staggering 91 per cent of the market trading within 10 per cent of their one-year highs.
Going by the life-cycle of the 1993 bull, there is another eight months of vitality left. But of course, no one bull or bear market is exactly the same as another.
For example, this time round, despite an increasing number of stocks which have appreciated, there is still a big chunk - 22.4 per cent of the market, to be exact - trading more than 50 per cent off their five-year highs.
And nearly 37 per cent are still 50 per cent lower than their 10-year highs.
These are significantly bigger than the numbers seen in 1993. But it has to be noted that we now have a lot more companies listed on SGX. And Theory One above still applies, some companies are still finding it hard to compete and investors are recognising that.
Or another way to look at it is, the bull has not reach its zenith. But my suspicion is that we are unlikely to see the repeat of the scale of frenzy as that of 1993.
And that is a good thing.
The writer is a CFA charterholder. She can be reached at hooiling@sph.com.sg
Copyright © 2005 Singapore Press Holdings Ltd. All rights reserved.
By TEH HOOI LING
SENIOR CORRESPONDENT
I'M sure you don't need anybody to tell you this: The market is very hot now. How hot? Well, don't get too happy if your stocks have gone up by ONLY 20 per cent so far this year.
This would mean that your stocks have underperformed the market. The median price appreciation of all the stocks listed on the Singapore Exchange is 24.8 per cent between the beginning of 2007 and now.
The average - pulled up by the likes of Baker Technology, Lottvision, Showy International and Shanghai Allied Cement which have risen by more than 500 per cent each - is a whopping 40.9 per cent.
Eighty-one stocks, or 11 per cent of the market, have seen their prices doubled or more in less than four months. Some 25 per cent of the market, or 187 stocks, have surged 50 per cent or more. In all, 603 stocks have advanced and just 92 have declined.
Compared with the end of 2005, the median and average increases in all SGX-listed stocks are 52.8 per cent and 95.7 per cent respectively.
About a third of the market has more than doubled. Yongnam Holdings is the biggest gainer during that period - it's a 13 bagger in less than 16 months. It is followed by Nylect Technology, up by 1,290 per cent, and Baker Technology, up 1,136 per cent.
And as of yesterday, 130 stocks or nearly 18 per cent of the market are trading at their one-year highs. These include companies like Singapore Airlines, SMRT, Tan Chong, UOB Kay Hian, LC Development, Eng Wah Organisation, and so on.
Flashback
In this column in October 2005 - which was two-and-a-half years after the market started climbing from its trough in March 2003 - I noted that the rally was confined to only a select group of stocks. At that time, more than 70 per cent of all stocks were still trading at less than half their peak prices of the last 10 years.
'By contrast, in early 1996, some 70 per cent of stocks were trading in the top half of their 10-year price range. And on average, stocks were then trading at 60 per cent above their lowest levels.
'With that perspective, the market performance we have thus far is not quite the same as the bull runs we have seen before. In the super-rally of the first half of the 1990s, one could simply pick any stock and make a bundle. Rumours were the fuel for the stocks' ascent.'
I posited two theories at that time. 'One: the old type of bull is now an extinct breed. The factors which could have led to the death of the old bulls may include the fact that the world's economies have evolved in such a way that more than half of Singapore firms no longer have a fighting chance in today's knowledge-based, globalised and highly competitive market place.
'As investors are more discerning now, they realise today's economic realities and are only going for the fundamentally good stocks. Furthermore, the lessons learnt, and the lingering scepticism and loss of confidence from the crashes of 1997 and 2000 are not forgotten.
'The second theory is the direct opposite of the first one: that the bulls of old are still alive and kicking. If that's the case, a lot more stocks will have to play catch-up.'
Towards the end of the article, I noted that at that time - October 2005 - there were 48 stocks at their one-year highs, versus 40 stocks at their one-year lows.
It was a reversal from the beginning of September when one-year lows outnumbered one-year highs by 91 to 29.
Traditionally, one way to measure the strength of a trend is to compare the number of stocks posting new 52-week high closing prices with those posting new 52-week lows. In a strong uptrend, many stocks are likely to post new high prices, while relatively few are likely to be selling at new lows for the year.
Based on that, I concluded: 'So perhaps we can expect better things to come - not necessarily in terms of the STI hitting new highs, but perhaps more of the second tier market. That would prove to us that the old bulls that we knew are still well.'
Maturity of the bull
Indeed since then, as noted earlier, a wider segment of the market has participated in the bull run.
This is proof that the old breed of bulls is still very much alive and well. A few factors would account for the return of the bulls as we know them.
One, the very high liquidity in the system. Two, a robust economic backdrop with lots of businesses going around for all. Three, some companies have improved their competitiveness and those that don't make it become targets of reverse takeovers.
So if what we are seeing is the bull of old, then it will presumably go through the same life cycle as the previous ones. Now, let's try to ascertain how mature the current bull is.
From the table, you can see that as the bull in the early 1990s progressed, more stocks would scale new heights.
What we have seen in the market in the last two months is reminiscent of the two months between February and April 1993.
Then, the proportion of stocks trading within 10 per cent of their 52-week highs increased to 60 per cent by early April from 43 per cent in February.
Similarly today, the proportion of stocks trading within 10 per cent of their one-year highs is just over 60 per cent. This is up from 49 per cent two months ago.
In terms of the percentage of stocks which are benefiting from the bull market, we have already surpassed even the peak of 2000. During the biggest point of the dotcom bubble, only 24 per cent of the market was trading within 10 per cent of their one-year highs.
So what we are seeing today is the 1993 variety. Back in 1993, the two months following April saw even stronger buying momentum which led to a staggering 91 per cent of the market trading within 10 per cent of their one-year highs.
Going by the life-cycle of the 1993 bull, there is another eight months of vitality left. But of course, no one bull or bear market is exactly the same as another.
For example, this time round, despite an increasing number of stocks which have appreciated, there is still a big chunk - 22.4 per cent of the market, to be exact - trading more than 50 per cent off their five-year highs.
And nearly 37 per cent are still 50 per cent lower than their 10-year highs.
These are significantly bigger than the numbers seen in 1993. But it has to be noted that we now have a lot more companies listed on SGX. And Theory One above still applies, some companies are still finding it hard to compete and investors are recognising that.
Or another way to look at it is, the bull has not reach its zenith. But my suspicion is that we are unlikely to see the repeat of the scale of frenzy as that of 1993.
And that is a good thing.
The writer is a CFA charterholder. She can be reached at hooiling@sph.com.sg
Copyright © 2005 Singapore Press Holdings Ltd. All rights reserved.
posted by mrmoon at 5:24 AM
0 Comments:
Post a Comment
<< Home