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Weak Job Card A Blip; Penny Stocks Back In-Play?
Singapore Market Commentary | 17 January 2014
By: Nicholas Tan
Articles (71) Profile

In the West, US employers may have hired the fewest workers in 3 years in Dec-13, but the setback is likely to be temporary amid signs that cold weather conditions might have played a part. Non-farm payrolls rose only 74k last month, the lowest increase since Jan-11, while unemployment fell 0.3% points to 6.7%, according to the US Labour Department.

The fall in unemployment rate to its lowest since Oct-08, can be mostly due to lower labour force participation rate, which fell 0.2% points to 62.8% – the lowest since 1978. That accounted for two-thirds of the drop in the unemployment rate in Dec-13.

Nonetheless, the weak job card is unlikely to change the game plan as the Fed will continue to slowly pullback its bond buying programme in 2014 before contemplating an interest rate hike in 2015.

Back home, the US tapering is playing a part in the lacklustre behaviour of the local stock market in the new year, as the Straits Times Index showed a lack of vigour and direction, forcing punters to speculate penny stocks such as Albedo, JES Int’l and OEL to make money. Small-cap stocks continue to drive most of the activity, while blue chips take the back seat.

There was a story in the newspaper not too long ago that local developers are looking abroad for growth. This goes to show property stocks are not going to perform well this year. Flash figures from HDB seems to have statistically backed this claim as the resale price index in 4Q13 fell 1.3% from 3Q13, making it 2 consecutive quarters of contraction.

Banks are also looking abroad for growth as property loans ease off. On 6 Jan, OCBC announced a proposed takeover of Wing Hang Bank for an estimated $5.8b, or 1.7x estimated 2013 book value, but there are concerns that it might overpay, leading to the stock losing 4.5% over the past 3 weeks at $9.72 – 16 Jan closing price.

Well trained in aspects of finance and business, Nicholas oversees the finance and manufacturing sectors at Shares Investment.

Please click here for more information about this author.

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