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