Banks provide boost as STI rises 25 points

After a two-day correction (or bout of short-selling), a rebound (or short-covering) in the three banks yesterday helped elevate the Straits Times Index (STI) by 25.19 points to 3,261.84.

Turnover, however, was a low 1.2 billion units worth $957.3 million, and excluding warrants there were 258 rises versus 158 falls throughout the whole market, so trading was actually firm and in line with the index.

The STI's rise came despite a marginal loss for the Dow futures in the morning, the closure of Hong Kong for the Mid-Autumn Festival and a mixed opening across Europe in the late afternoon.

Wall Street on Wednesday ended with the Dow Jones Industrial Average at a sixth consecutive all-time high, the S&P 500 Index at a fifth successive record and the Nasdaq Composite at its fourth.

Reports suggested that apart from expectations of a business-friendly budget proposed by the Trump administration, the buying was ahead of today's September payrolls report, though weighing on sentiment was a report that US Secretary of State Rex Tillerson may resign, which he later debunked.

Whatever the case, the latest economic data and expectations that today's jobs report will indicate that the US economy is continuing to recover have underpinned increased anticipation of a December US interest rate hike.

The chance of this occurring, as priced in by the federal funds futures market, is 70 per cent.

Higher rates means wider bank margins, which may explain the rebound in DBS Bank, United Overseas Bank and OCBC Bank that collectively added about 12 points to the STI yesterday, accounting for half the index's final gain.

CapitaLand, Jardine Matheson and Jardine Strategic also contributed. In the land transport sector, shares of ComfortDelGro (CDG) have been weak recently due to earnings-related concerns, though support has come from a proposed tie-up with rival Uber.

Maybank Kim Eng said its recent conviction "buy" on the company has not been compromised by a Business Times report earlier this week about a possible investigation into Uber's vehicle procurement practices by the Corrupt Practices Investigation Bureau.

It said that whether the article was accurate or not, its call is premised on expectations of an earnings uplift from CDG's rail and bus units and an ex-taxi free cash flow yield of 7.8 per cent.

"If a tie-up (between CDG and Uber) does in fact materialise, we see enhanced returns for CDG's taxi operations in the longer term," it said, maintaining its $2.40 target price.

Yesterday, the counter slipped $0.015 to $1.985 with 9.7 million shares traded.

Among the actives were shares of mobile satellite communications company AddValue Technologies, which ended $0.001 lower at $0.043 on volume of 34 million. It announced it had signed an agreement with a partner to offer its maritime product and data solutions bundle for deep-sea fishing vessels.

Its chairman and chief executive Colin Chan said the successful execution of this partnership will contribute to hardware sales and is expected to generate a monthly recurring revenue of about US$200,000 (S$270,000).

In other news, the Singapore Exchange's investor education portal My Gateway reported that the exchange's second board Catalist celebrates its 10th anniversary this year, and the 10 biggest Catalist stocks have a combined market capitalisation of $3.5 billion.

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