Singapore Market

ST Index could have ended a five wave structure from 2190. Regional
markets
show signs of trend deterioration

In our recent mails, we stated that the ST Index was in the terminal
stages
of a wave 5 move and recommended reducing exposure to high beta stocks
and
switching defensive high yielding stocks. Today's price action appears
to
mark a swift reversal. The ST index briefly rallied to 2620 probably
due to
the expiry of Simsci futures and then quicky corrected. On Wednesday,
we
stated that we expected the ST index to rise marginally above 2605 and
then
quickly correct back down. The index has exactly done that. We have
attached 2 charts outlining the wave patterns on the ST index for
readers.

We think that an impulsive 5 wave structure from 2190 has ended at 2620
and
the index could retrce back towards 2430 in the coming weeks. A break
below recent low of 2470 would strengthen the view. We are witnessing
similar signs of trend deteriorationon in regional markets. In Japan,
the
Nikkei shows a double top formation with critical support at 15780
after
failing to retrace past 62% of recent fall. The index has so far
corrected
by 300 odd points and the risk of a break below 15780 is very high. In
HongKong, the HSI has corrected by 300 points breaking below a prior
low.
All in all, we think that regional markets show signs of trend
deterioration and a bear trend could be looming.


(See attached file: stiwave count.jpg)(See attached file: STI60min.jpg)
Best Regards

K Ajith

64195411

Singapore Market

ST Index- Limited upside, sell into strength.

Singapore market - Last Thursday, we issued a report stating that
small
cap stocks appeared risky and price action suggested an imminent
reversal.
Since then, we have seen a pullback in several China related small
caps,
some of which have corrected more than 10% from their recent highs.
The
broad based pullback in the sector suggests that we are witnessing a
trend
reversal and prices are likely to ease further in the coming weeks. A
similar view cautious view was also extended towards the HSCEI index in
Hong Kong, when we mentioned that a wave 5 price objective for the
index
was near the 7180 level. The actual high turned out to be 7287. The
index
had subsequently corrected to close at 6858 as of yesterday. At this
stage,
it appears that we are witnessing a macro change in sentiment for China
related stocks.

As for the ST index, we also maintained that even as the index rose
past
2580 which was our original upside target, a meaningful correction was
not
too far away. Price action so far supports this view. The index rose
to a
high of 2605 on last Friday and then quickly retraced 50% of it's gains
from 2537. We are now looking for the index to breach the 2605 level
marginally and then correct down below 2570. Such a move would have
heighten the possibility that a medium term top is in place. Our
preferred
strategy would be to reduce exposure on high beta stocks and to look
into
defensive plays.





Best Regards

K Ajith

64195411

On SPH

SINGAPORE (XFN-ASIA) - Singapore Press Holdings Ltd was lower after
its
net profit in the second quarter to February fell 11.9 pct
year-on-year to
84. 56 mln sgd as gains from investment income declined, dealers said.

Total operating revenue, however, improved slightly to 241.72 mln
sgd
from 236.85 mln in the year earlier term, supported by higher
newspaper
revenue and increased rental income.

At 2.52 pm, SPH was down 0.12 sgd or 2.66 pct at 4.40, off a low
of
4.34, with 14.07 mln shares traded.

The Straits Times index was down 0.62 points or 0.02 pct at
2,545.63.


Despite the lacklustre results, analysts are still positive on
SPH.

Cititgroup said it is keeping its "buy" rating on SPH with fair
value
of 5.62 sgd.

"We see the group as a laggard reflation play with attractive
valuations and supported by a yield of 6 pct," Citigroup said in a
note to
clients.

OCBC Securities said it is also keeping its "buy" rating on SPH
with
fair value of 5.15 sgd per share.

"Earnings growth this year is well supported by healthy economic
growth and robust consumer spending. With first half to Feb 2006
earnings
coming in at 183 mln sgd, our full year (to August 2006) earnings
forecast
of 387 mln sgd should remain on track," it said.

"While the windfall from non-core asset disposals may take some
time
to materialize, SPH remains an attractive yield play with estimated
net
dividend yields of 6 pct," it added.

SPH has identified the Paragon shopping mall on Orchard Road as a
non-core asset that it could divest but it remains reticent about the
timeframe.

Merrill Lynch said it also keeping its "buy" rating and fair
value of
4. 90 sgd for SPH.

"While SPH's near-term share price may be volatile given the
slight
disappointment on its display ad growth trend, we maintain our belief
that
a broader ad market recovery, supported by improved consumption
spending,
would benefit retail, property and finance sectors, as well as SPH in
coming months, " Merrill said.

CIMB-Research said it is also keeping its "outperform" rating for
SPH
with fair value of 5.40 sgd, while Kim Eng Securities rates the stock
a
"buy" with a price target of 5.20 sgd.

But DBS Equity Research was not as optimistic as the others,
rating
SPH a "hold" with fair value of 4.42 sgd from 4.44.

"The results reaffirmed our view that earnings growth for SPH's
core
business will remain lackluster," DBS said.

(1 usd = 1.61 sgd)

Singapore market

Singapore market- Recent pullback in the ST index came largely on the
back
of weakness in property stocks along with pullback in prior favorites
such
as SGX and SIA. Banking stocks have picked up some of the slack and we
note
that the SGX Finance index is now trading at new highs for the year.
The
sector should very likely lead the index up higher in the coming days.
Small cap stocks have also along with the ST index and market players
are
becoming increasingly selective. Preferred plays remain China related
small
caps. The tendency however is for some of these stocks to rise sharply
and
then consolidate for a lengthy period. This leaves a very narrow window
of
opportunity for traders.Given such a scenario, the best trading
strategy we
advocate readers is to buy on weakness, when a stock consolidates on
low
volume and volatility and then to sell when the volatility expands.
This is
essentially a contrarian trading strategy.


Stocks

A potential theme that could emerge in the coming days could be
speculative
interest in oil and gas related small caps. Brent Crude Oil continues
to
trade near the upper end of the US$70.00-US.60.00 trading range. The
commodity is currently trading at US$68.30. If the commodity breaks
through the US$70.00 barrier, speculative interest could once again in
return towards small cap oil and gas plays. We feature some popular
small
cap oil and gas plays.


China Petrotech- The company essentially provides IT solutions to oil
and
gas companies in China. The stock had rallied sharply from $0.33 to a
high
of $0.74. It has since eased back to $0.68. Immediate support is at
prior
low of $0.67 and next support at 30 day moving average zone of $0.64.
Volume on the current decline is so far relatively low. However we
still
need to watch the important support at $0.67. If this level holds, then
the
stock could rebound to test its prior high of $0.745. Even so, we thnk
that
Sky China Petroleum, offers lower risk at this stage. The stock is
trading
at 15.4x historical earnings.

Sky China Petroleum- The company provides engineering solutions to
oilfields in PRC. The stock has been trending up since early 2006,
however
pace of rally has been more gradual compared to China Petrotech. over
the
past 2 weeks, the stock has corrected from a high of $0.625 to a low of
$0.555 as of yesterday. The stock is close to a trendline support zone
near
$0.545-0.55. Volume has also been relatively low on recent
decline,suggesting a high likelihood of a rebound of the zone. We
recommend
that readers watch the support zone and establish a long position only
if
the stock stabilizes or rebounds off that zone. The stock is currently
trading at 12x historical earnings.

(See attached file: SKY Petrol.jpg)(See attached file: China
petrotech.jpg)
Best Regards

K Ajith

64195411

STI and others

Singapore market- The ST index along with several China related small
cap
stocks has corrected over the past 2 days. This was the correction that
we
were looking out for and the present pullback is seen as a correction
of
the advance of the move from 2477- 2554 for the ST Index. Additionally,
the
pullback has a corrective wave pattern, implying that this is just a
minor
pullback and a prelude to further gains. A similar pattern was formed
1-2
month ago, when the index drifted sideways between 2518 to 2477. This
correction is expected to be shorter and could very well terminate
today
near 2325-2330 range. As for China related small caps, we do not see
any
evidence of a sector wide trend reversal. We note that similar Hong
Kong
listed China H Share and Shanghai B Share indices are still trending
up
strongly. As such, we think that overall uptrend is still intact for
the ST
index and for China related stocks in general.

Stocks

Ellipsiz- Earlier in the week, we had recommended 62-63.5 range as a
preferred entry level for the stock. The stock had reached the target
range
and we believe this is opportune moment to get into the stock. The big
picture remains positive, which is that the stock has broken out of
triangle pattern and is consolidating in a pennant like formation.
Recommend a buy at $0.62-0.625 on expectation of a retest towards $0.66
and
if that is broken towards $0.71.

DMX- We had recommended accumulating the stock near $0.95 and targeted
a
move towards $1.02. The stock had reached a high of $1.04 and had
pulled
back towards $0.965 over 4 consecutive days. Watch support level near
$0.95-0.96. Resistance remains $1.02-1.03. Trade the range.


(See attached file: Ellipsiz.jpg)(See attached file: DMX.jpg)


Best Regards

K Ajith

64195411