STX Pan Ocean Off 5.9%; S$2.82 N/T Support

STX Pan Ocean (V33.SG) down 5.9% at 2-month low of S$3.06, hurt by 2.7% fall in BDI, overall market weakness. But rebound off morning low of S$2.95 suggests bargain hunting or short-covering at work, although unlikely to help push share price into positive territory. On charts, technical indicators looking bearish, with Direction Momentum Indicator on ADX recently triggering Sell signal, while RSI still heading south but yet to reach oversold region. Near-term support at S$2.82, based on 61.8% retracement of rise to May high of S$4.00 from Jan. 22 low of S$2.09.


STOCK CALL: Credit Suisse keeps STX Pan Ocean (V33.SG) at Neutral with S$3.75 target price. Says lead indicator Baltic Dry Index (BDI) has only fallen back slightly so far but tips index to head lower in near-term due to seasonal weakness, reduced iron ore cargo as a result of China's stockpiling. Says shares in dry bulk shippers have corrected as worries priced in, but could still go lower; "we think there is still downside share price risk in the short-term on BDI weakness and thus it is too early to pick them up." Share down 6.2% at S$3.05 vs FTSE ST All Share down 1.7%. Korean-listed share (028670.SE) closed down 7.3% at KRW2,280.

OIR Property Sector Outlook

Outlook in the property sector still remains uncertain. Whileproperty price index has remained resilient, the lack of transactionvolume, low take-up rate and delay in launches by developers raised moreconcerns about a deteriorating property market. Historically, lower priceswould follow after a period of sharp decline in volume and the expectationof slower rental rates growth provide an additional catalyst to dampenproperty prices going forward. In particular, we see the high-endproperties at greater risk to further price corrections, as there is stilla substantial pipeline of projects waiting to be launched. Mass marketsegment was weak in 1Q08, most probably due to fears of oversupply afterdevelopers rushed to launch their mass market projects during the period.Going forward, pipeline of mass market launches appear limited and thisshould ease concerns of oversupply and drive take-up rate higher. Wereiterate our NEUTRAL view on the Singapore residential property sector asour expectation of price weakness in the high end and price stability inthe mid to mass market properties remain unchanged. Thus, we remaincautious over developers that have large land bank exposure in the high endmarket, like CapitaLand and Keppel Land. We are currently reviewing ourcalls on CapitaLand, City Developments, Keppel Land and UOL Group due to achange in analyst coverage.

In the STimes today, there is a report of new launches being priced 10% lower. Could this be the start of more to come?

STI Down 1.6%; Breaks Below Key 3000 Support

Singapore shares following Wall Street lead, sharply lower in early trade as resurgent inflationary, credit crunch fears grip investors; STI down 1.6% at 2997.66, goes below 3000 for first time since April 1, next support tipped at 2950. "Sell in May and go away looked like the right call, people are panic selling and there are no buyers around to support the market," says strategist at local house. Most blue chips in negative territory with property stocks particularly weak, likely on renewed global economic jitters; Hongkong Land (H78.SG) worst performer, down 4.9% at US$4.44. Broad market volume slightly above yesterday's but still low by normal standards, losers outnumber gainers roughly 5 to 1

DJ MARKET TALK: ABN Amro Starts China Milk At Buy; S$1.10 Target

STOCK CALL: ABN Amro initiates China Milk (G86.SG) at Buy, sets S$1.10 target price. Broker says raw milk, bull semen producer is good play on rising food prices in Asia with rising disposable incomes in China driving demand for dairy products. "China Milk is an excellent play on the Chinese food theme: it is the largest company in China in the bull semen, cow embryo and raw milk businesses, in terms of market share." Adds valuation undemanding, stock trading at steep discount to Asian agricultural peers. Share currently up 6.2% in active trade at 2-week high of S$0.775.

STI +0.6%, Still In Tight Band; 3200 Resistance

[Dow Jones] Singapore stocks manage to cling on to gains, but upside appears limited as market still unable to shrug off recent sluggish tone, judging from thin volume. STI +0.6% at 3163.75 midday after drifting in tight 3162-3184 band for whole morning. Resistance remains at 3200. "It's very rangebound. There's no incentive. The market is looking for direction but there's not much," says trader at bank-backed brokerage. FTSE ST All Share Index +0.6% at 807.31. New listing China Taisan Technology (F2X.SG) most active on SGX with 54.3 million shares traded, +2.1% at S$0.245.

Lehman Downgrades STX Pan Ocean To Underweight

Dow Jones] STOCK CALL: Lehman Brothers downgrades STX Pan Ocean (V33.SG) to Underweight from Equalweight, citing limited upside to reduced target price of S$3.10 vs S$4.00 previously. New target, based on sum-of-parts valuation, assumes fleet value multiple of 1.3X vs 1.5X earlier. Says larger-than-expected supply imbalance in dry bulk shipping industry likely to drag down sector-wide freight rates, earnings from 2009, hence hurting STX. Expects share price to remain volatile in near term due to seasonally weak BDI, with upside expected during seasonal end-3Q BDI bounce. Stock off 0.8% at S$3.64. Korean listing (028670.SE) closed down 0.6% at KRW2,680

Olam Off 7.0%; Confirms Dairy Farmers Interest

Olam (O32.SG) shares heading lower as convertible bond issue, news of potential M&A unsettles investors; stock down 7.0% at S$2.77 with support tipped at S$2.60 (May 26 low). Commodities player confirms it is mulling bid for Australian branded dairy business Dairy Farmers; CFO says on conference call, "our M&A team is having a look at it, but no formal bid has been made by us." Analysts estimate Dairy Farmers could fetch up to A$900 million, with rising commodity prices generating lots of interest in the takeover target. CFO also confirms that company has submitted bid for assets of Ivory Coast Cotton producer La Compagnie Cotonniere Ivoirienne, with Ivory Coast newspaper Fraternite Matin reporting assets worth around US$19 million. While investors may like that company is keen to expand its footprint as it rides the soft commodities boom, moves being overshadowed at present by worries over dilution from fund raising, execution risks.

STI May Open Up But Retreat Later On Short Sales

Dow Jones] Singapore stocks may repeat Wednesday's pattern of opening higher, aided up further pullback in oil prices, and giving up gains later in day, as Wall Street's mixed performance overnight not expected to offer any clear direction for investors. Market volume likely to remain thin as players lie low given lack of leads. "I think nothing much is going to happen. People are shorting at every available opportunity. The market is more inclined towards short positions," says local house trader. Immediate support for STI at 3100, resistance at 3180; closed down 0.6% at 3134.80 yesterday.

Phillip Sec Raises Sinopipe Target To S$0.60

Phillip Securities raises Sinopipe Holdings (X06.SG) target price to S$0.60 from S$0.575; reiterates Buy call. Broker says target price upgrade reflects recent win of CNY660 million build-transfer-operate piping and infrastructure contract. Says contract win was much larger than expected, outlook promising, "significant further earnings growth looms." Says stock looks attractive with cheap valuation, trades at FY08 P/E of only 5.5X due to rapid forecast earnings growth. Adds revised target price only factors in phase 1 of the contract as details for phases 2 and 3 are yet to be announced. Shares currently down 1.2% at S$0.405.

Mid Day Market Update

[Dow Jones] Singapore blue chips may close tad higher as bargain hunters nibble away amid pullback in oil prices. STI now +0.5% at 3169.15, with most components higher, but any further gains likely to meet resistance at 3200 as leads few. "The office is so damned quiet, I'm almost falling asleep," local dealer says of his house's trading desk. Shares in broader market also tad firmer, with FTSE ST All Share Index +0.4% at 808.31. Still, thin market volume suggests investors generally sitting out session.