Banks, Jardine help drive STI up 2.2%

Index owes 15 points of its eventual 29.45-point rise to the high performers

The banking sector was once again the focal point of the trading week.

It rose initially because of expectations of a December United States rate hike, then fell sharply on Tuesday and Wednesday when traders switched to China bank trading in Hong Kong following a reserve requirement rate cut by China's central bank.

In the final two days of the week, traders rediscovered their appetite for local banks, possibly aided by generous amounts of short-covering.

Throughout the five days, the fate of the Straits Times Index was largely determined by the banks and Jardine stocks, and yesterday, the index owed about 15 points of its eventual 29.45-point rise to 3,291.29 to the banks and Jardine Matheson.

For the week, the index gained 72 points or 2.2 per cent.

Turnover has constantly hovered near the $1 billion mark, considered by many to be the unofficial breakeven level for the local broking industry.

Yesterday, however, business done was 2.2 billion units worth $1.3 billion, the unit volume inflated by 285.8 million traded in Magnus Energy, the counter closing unchanged at $0.001.

Apart from the banks, Jardine components also played a part in swaying the index, as did CapitaLand, Thai Beverage and, to a lesser extent, ComfortDelGro, the latter still hit by worries that its earnings will be affected by new entrants in the taxi sector such as Uber and Grab.

We expect the MTI (Ministry of Trade and Industry) to upgrade the full-year GDP growth forecast again in November. Maybank Kim Eng

On a more positive note, the real estate sector continued to display signs of a turnaround during the week.

The Urban Redevelopment Authority released the Q3 2017 flash estimate of the private residential property price index, which showed a rebound for the first time in four years that some have described as a key inflection point marking the end of the Singapore housing bear market.

In response, OCBC Investment Research maintained its "overweight'' in the sector, saying that it expects home prices in Singapore to be flat this year and to appreciate 3 per cent to 8 per cent next year, as the rental market begins to pick up and macro-economic conditions remain firm.

On the topic of growth, Maybank Kim Eng, in a Thursday Singapore Economics report, said that with Q3 GDP growth near 4 per cent and first half GDP growth at 2.7 per cent, GDP growth for the full year could well exceed the government's 2 per cent to 3 per cent and the broker's 3 per cent estimates.

"Recent September PMI remains strong, climbing to six- to seven-year highs for both overall and electronics readings.

"We expect the MTI (Ministry of Trade and Industry) to upgrade the full-year GDP growth forecast again in November, when the finalised Q3 GDP is released," it said.

Keppel Corp yesterday rose $0.09 to $6.68 on volume of 4.3 million. Nomura, in a "buy" recommendation, said it has a sum-of-parts target price of $7.90 for the stock.

"We like Keppel's diversified earnings profile, solid balance sheet and prudent capital allocation track record. We believe this year will remain challenging for the group's O&M (offshore and marine) business with a weak earnings trend and limited new orders," said Nomura. "Yet, we believe the sector is starting to bottom out. Valuations look inexpensive."

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