SINGAPORE - So far, trading in August has gone according to script.
Activities on the local bourse have slowed considerably, with few incentives to lure investors to take up fresh positions.
Even the annual Federal Reserve meeting later this week in Jackson Hole in the United States, where leading central bankers gather from across the globe, may fail to stir up interest in a big way.
Outgoing US central bank boss Ben Bernanke is not turning up for the meeting, and President Barack Obama is keeping his cards close to his chest as to who he plans to appoint as Mr Bernanke's successor.
So, few traders are expecting any earth-shaking pronouncements out of Jackson Hole, which Mr Bernanke had previously used as his platform to make significant monetary policy announcements that went on to shape global stock market directions.
Still, beneath the placid market calm, some traders are closing out their positions and taking profit, convinced that a market correction is imminent.
Last week, Citi Investment Research strategist Markus Rosgen noted that institutional fund managers continued to be net buyers of shares, as they poured a net US$1.3 billion (S$1.6billion) into equities funds.
But they are slowly liquidating their positions in Asia, where they sold about US$710million in shares, and in America, where they divested US$2.1billion worth of US shares.
As it is, widely watched market indexes are slowly paring the gains they have made since recovering from May's sell-off, after Mr Bernanke first hinted that the US Fed might scale back on the liquidity it was pouring into the global banking system.
Last week, the benchmark Straits Times lost 1 per cent as it slipped below the important 3,200 psychological support level to close at 3,197.53 on Friday.
Wall Street fared even worse, with both the Dow Jones Industrial Average and S&P 500 losing over 2 per cent, following a big sell-off last Thursday.
Still, during a time when market movements across the globe are largely determined by the actions of the world's leading central banks, it may be worthwhile to study whether blue chips deserve the valuations pinned on them.
Although their second-quarter results are largely within expectations, the big worry is that more companies are talking down their prospects.
Worse, there is the impression that some companies have surprised investors positively not because they are generating more in revenue, but because they are producing more profit by starving their operations of much-needed cash to grow business.
JPMorgan noted in a report that Singapore companies have under-invested after the global financial crisis as a response to macro uncertainties, and this has helped sustain their returns on capital.
But it added: "This implies that a significant portion of the capital expenditure bill is going to maintenance functions, rather than funding growth, as evidenced by the falling returns over the past year."
It singled out the transport, energy and retail sectors as those which seemed to have the most "missing capex".
For investors, the big question to ask is whether such a ploy will stay feasible, once the ample liquidity provided by the world's leading central banks is removed, and stock-picking becomes a crucial art again.
To paraphrase legendary investment guru Warren Buffett: We know who's swimming naked when the tide goes out.
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