As the year wears on, it becomes increasingly apparent that investors had ignored stock valuations until JustCo's IPO. JustCo, which fell on listing from its IPO price of 94 cents, continued to ease this week, ending at 76.5 cents. That still leaves the stock somewhat overvalued based on the price-to-earnings (PE) ratio. Instead of a PE ratio of 132 times at IPO, the PE ratio is 107 times as of May 29. Market watchers have articulated that growth companies should no longer be valued on earnings and that is the case with the biggest IPOs in the US.
The Straits Times Index has solidified its move above 5,000, although it continues to hover around 5,040, ending the week of May 25-29 at 5,037, down 31 points week-on-week. A break above the four-times-tested resistance at the 5,030-5,040 range sets an upside of around 5,740 initially, and 6,000 subsequently. This breakout is likely to be good as both quarterly momentum and 21-day RSI are neutral to positive. This should be able to support a move towards 6,000 by the STI.
