Business

Banks drive STI to new 22-month high

Gains registered by the Jardine stable - Jardine Matheson, Jardine Strategic and Cycle & Carriage

Rises in the three local banks yesterday pushed the Straits Times Index to its highest in about 22 months, up 21.14 points, or 0.65 per cent, to 3,271.11.

Turnover was 2.1 billion units worth $1.9 billion but gains were not widespread - the advance-decline score excluding warrants was 239-268.

Large jumps in DBS, UOB and OCBC elevated the index by about 19 points, with DBS alone accounting for 9 points.

GAINS

There were also gains registered by the Jardine stable, namely Jardine Matheson, Jardine Strategic and Cycle & Carriage. The FTSE Financials Index, in the meantime, gained 0.84 per cent at 910.77.

OCBC announced that it had agreed to buy National Australia Bank's private wealth business in Singapore and Hong Kong.

RHB said it views the deal as positive for OCBC's overall wealth business, which in the first quarter accounted for 32 per cent of total income.

"However, the impact is likely to be small as the acquired loans and deposits only account for 1.1 and 1.6 per cent of OCBC's current loans and deposits respectively'', said the broker.

"As the impact of the acquisition is small, we maintain our $10.22 target price and Neutral recommendation.''

Macquarie Warrants (MW) said Macquarie Equities Research has maintained its "outperform'' on OCBC with $10 target, saying the bank's earnings were of "high quality'' while describing the latest results as "a strong set'' in which loan-loss provisions are trending towards normalised levels as MQ expected.

OCBC's shares ended $0.10 higher at $10.56 with 14.1 million traded.

Among the top actives was commodities firm Noble Group, which on Tuesday said a preliminary review of its draft unaudited management financial information indicates that it is likely to record a net loss of around US$130 million for the three months ended March 31, 2017.

SHARES CRASH

In response, Noble's shares on Thursday crashed $0.42, or 32 per cent, to $0.875 on volume of 103 million. The shares have just undergone a 10-1 consolidation.

Elsewhere, the Singapore Exchange's (SGX's) investor education portal My Gateway reported that the Information Technology Sector was the top-performing sector so far in 2017.

"Specifically, SGX's IT Sector generated a capitalisation weighted total return of 4.9 per cent in April, bringing YTD gains to 33.3 per cent... This is higher than the Straits Times Index's total return of 14.3 per cent and the regional benchmark's (MSCI AC Asia ex-Japan IT Index) total return of 18.4 per cent (or +22.6 per cent in US$ terms) over the same period."

On Wednesday, US President Donald Trump sacked Federal Bureau of Intelligence director James Comey, who was leading an investigation into possible Russian meddling in last November's presidential election.

US financial magazine Barron's, in its market report, quoted Dan Clifton from institutional brokers Strategas Research as saying talk of impeachment has increased significantly.

"The narrative is not going away and will continue to hamper the lightly staffed administration,'' said Mr Clifton.

"This will also make bi-partisan compromise more difficult in the coming months.''

Rabobank Financial Markets Research, in its daily notes Impeaches and Cream, referred to the market reaction to Mr Comey's sacking by saying "it's strange that markets shrugged - especially as the online odds of 'Trump impeachment' have soared from Feb 1 to April 6, according to the UK's Daily Mail''.

The VIX Index, which measures the market's expectations of future volatility, is currently around 10, which has been reported as being the lowest since 1993.

A low reading is sometimes interpreted by contrarians to signal heightened complacency.

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