THE STRAITS TIMES Index rallied in the week before the festive Chinese New Year period. It broke through four consecutive weeks of decline to finish 60 points, or 2.2% higher, last Thursday at 2,753.63 points after the European Union said it would help Greece manage its massive debt and China’s government announced consumer prices rose 1.5% in January, lower than the 1.9% rise in December.

The Straits Times Index declined 2.4% to close at 2,745.35 last week as China tightened its monetary policy to fend off inflation and asset bubbles. Five stocks dropped for every two shares that rose on the 30-member index, according to Bloomberg data. Stocks on the STI are currently trading at 14.7 times forward earnings, compared with about 10 times at the start of the year.

DESPITE THE STRONG performance of emerging markets in 2009, we believe the rally has further to go. Investors are increasingly recognising the structural change that has occurred in the global economy — it is the emerging and not the developed economies that are now driving global growth. Furthermore, economic fundamentals are much more robust and the prospects for earnings growth very strong in the emerging world. In addition, emerging markets are trading at a discount to developed markets. These advantages, coupled with favourable liquidity conditions, add up to a very positive outlook for these markets on a 12- to 18-month view.

The Straits Times Index reached 2,922.76 at its close, taking last week’s advance to 0.9%. Among the most hotly traded stocks were those of the three Mainboard-listed palm oil supply players. Indo food Agri Resources, Wilmar International and Golden Agri-Resources jumped 2.1%, 2.1%, 3.4% respectively, after Goldman Sachs Group raised its crude palm oil price forecasts to US$850 a tonne this year from US$800.

 

Sports footwear and apparel maker China Sports International climbed 14% to 20 cents after the company announced it obtained exclusive rights to distribute Federation Internationale de Football Association (Fifa), clothing and accessories in China over the next three years. DBS Vickers believes the win will provide the company with additional sources of revenue and improved margins for its products. The brokerage has a “buy” call on the stock, with a target price of 35 cents apiece.