Business

Banks drive ST Index's 22.8-point advance

Singapore's three banks bolstered by expectations of US rate hike in December

The three banks were once again the beneficiaries of expectations that US interest rates will be raised in December, all three ending stronger yesterday after the overnight release of the minutes of the September US Federal Open Markets Committee meeting.

The minutes showed that Fed officials believe the economy there to be strong enough to withstand a third hike for this year.

Boosted by gains in DBS Bank, United Overseas Bank and OCBC Bank, the Straits Times Index finished 22.81 points stronger at 3,303.09, despite a 20-point fall in the Dow futures that indicated a weak opening for Wall Street.

Turnover amounted to an average 2.5 billion units worth $1.05 billion, with the three banks accounting for $141.2 million or 13.4 per cent.

Excluding warrants, there were 255 rises versus 184 falls, so the index's reading did indeed signify a firm session.

The key sentence in the FOMC's minutes was that "consistent with the expectation that a gradual rise in the federal funds rate would be appropriate, many participants thought that another increase in the target range later this year was likely to be warranted if the medium-term outlook remained broadly unchanged''.

In the federal funds futures market, the implied probability of a December rate hike rose from 70 per cent to 76.7 per cent.

Rabobank, in its daily Financial Markets Research report, The Fed's Magical Mystery Tour, said it will shift its call for a next rate hike to December if the incoming economic data is not weak enough to change the Fed's mind.

In the second line, shares of diversified electronics firm Accrelist finished unchanged at $0.007 on volume of 134.7 million, making it the day's second most actively traded stock. The company announced a placement of 500 million shares at $0.008 per share to two investors, Mr Liu Song and Summit Planners Advisory Group.

It will use 75 per cent or $3.94 million for mergers and acquisitions in the e-medical arena and the rest for working capital.

Elsewhere in the electronics and technology sector, shares of Venture Corp dropped $0.12 to $18.43 on volume of 885,600. OCBC Investment Research in its "buy'' said Venture traditionally reports stronger second half figures than the first, and so the broker has raised its fair value from $14.80 to $20.33.

"Given its outstanding results for the past few quarters, solid balance sheet and sanguine outlook, we believe there is much scope for VMS to potentially increase its dividend, which has ranged between $0.50 to $0.55 per share since FY08,'' said the broker.

It also noted that Venture's boss Wong Ngit Liong has been buying shares in the open market, which it sees as an endorsement of where the company is heading.

The day's most active stock was Rowsley Holdings, which has regularly topped the daily actives list over the past few months.

It finished $0.002 weaker at $0.139 on volume of 147 million.

Credit Suisse, in its Investment Monthly, Strong Momentum Defies Headwinds', noted that tensions over North Korea have receded, at least for now, and hopes of US tax reform provided an added boost for stocks.

"Q4 is usually a positive one for equity markets, but we caution that a great deal of optimism is priced in,'' it said.

"This is why in our most recent Investment Committee meeting, we maintained our constructive view on global equities, with a continued preference for the Japanese, Eurozone, Swiss and Australian equity markets.''

This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts