“Planking” market hits small mid caps

Singapore mid-cap and small-cap indices tumbled 1.5% and 4.0% respectively in the past one month, says DBS.

And worse, there is a lack of catalyst to pull the stocks higher in the next couple of months.

Here's more from DBS:

Small mid caps dragged by a “planking” market. Notwithstanding the handful of positive earnings surprises in 1Q11 results season, lingering macro concerns dragged smallmid cap stocks lower as the Singapore mid-cap (FSTM) and small-cap (FSTS) indices tumbled 1.5% and 4.0% respectively in the past one month, worse than the 0.6% drop of the benchmark index FSSTI.

Stocks are cheap but catalysts are lacking. Small mid caps (12x FY11 PE) continue to trade at 20% discount to large caps (15x PE). However, with the passing of the results season, there is a lack of catalyst to propel stocks higher in the next couple of months. We believe interest in small stocks will remain subdued in the quieter months of June to July before the next reporting season kicks off in late July. Until then, risk aversion could even heighten on signs of slower growth globally.

Cautious on stocks with earnings risks, stay with mid cap yields and accumulate emerging value. In view of continued market uncertainties, we would exercise caution on stocks with earnings risks: Tat Hong, China XLX, Kencana Agri, Tiger Airways, Broadway and Hi-P. Stay defensive with mid cap yield stocks: MI, Ascott Residence, FCOT, MLT and CDL Hospitality. For longer-term investors, our strategy is to accumulate oversold value opportunities. For this, we recommend companies with strong bottomline growth over the next twelve months but trade below current market valuations: China Animal Healthcare, ConscienceFood, Ezion Holdings, STX OSV,World Precision and Tiong Seng.

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