IT'S been a while since I have written a blog on the stock market.
At first glance, nothing much seems to have changed. Except for stock market indexes pressing past key resistance levels in the past two weeks, lots of investors are contented to sit back and let the rally pass them by.
As I write, the benchmark Straits Times Index is languishing around Friday's close of 2,715, unable to shake off the lethargy which has afflicted stock markets around the world since August.
The bulls have been arguing for a while now that stock prices should continue to move upwards. Investors are earning nothing, keeping their money in the bank, with interest rates at close to zero levels.
And with the greenback showing no signs of revival against regional currencies, it is attractive for investment banks and hedge funds to borrow more heavily in US dollar to make even bigger bets in the region’s stock markets.
But a report by Citigroup this morning shows that foreign fund managers' attention seems to be fixated elsewhere.
"About US$781 million (S$1.09 billion) of new money flowed to offshore Asian funds last week. But this was less than one-third of the global emerging market funds, 37 per cent below global funds and even 10 per cent smaller than the amount taken in by Latin American funds whose assets under management are just one-fourth of Asian funds," it observes.
So what is holding back foreign funds from making bigger bets here?
Citigroup believes that the problem stems from the large number of cash-calls made by companies as they strengthen, or repair, their balance sheets after the recent massive financial fire-storm.
"Over the past three months, total cash-calls (both IPOs and secondaries) reached US$54 billion in Asia ex-Japan, which was 3.6 times the funds raised in Latin America, emerging Europe, Middle East and South Africa added together."
By coincidence, both ST and BT highlight today the large number of share placements made by Singapore firms this year.
I suppose that it is prudent house-keeping for management to make hay while the sun shines by raising money in whatever way they can – and share placements seem to be the easiest route currently – as there is no guarantee that the going may get tougher going forward.
But the discount is so big in some cases – loss-making bio-technology play Transcu gave new investors a eye-popping 38 per cent discount to last traded price – that it arouses unhappiness among existing shareholders.
With such share placements, these shareholders not only fail to get a bite of the cherry, but find that their existing shareholdings are diluted in percentage terms as well.
With the end of the year approaching in just over two months, I expect the "watchful peace" in the stock market to continue for a while yet.
At the start of the year, I wrote that the stock market mood was so bleak that dealers were wishing that the clock could, at that instant, strike at midnight on Dec 31, 2009 just to get the year over with. Today, many must be wishing that the current year never comes to a clsoe, as this could mean the end of the stock market party.