Business

DBS, OCBC help STI rise in mixed trading

Broad market sees 224 rises versus 239 falls on moderate turnover of $1.1 billion

Gains in banks DBS and OCBC helped the Straits Times Index (STI) rise 9.12 points to 3,222.69 yesterday, though the broad market was mixed with 224 rises versus 239 falls, excluding warrants. Turnover at two billion units worth $1.1 billion was moderate by recent standards.

The index's gain was likely in response to overnight firmness on Wall Street, which reports attributed to the absence of further political developments in Washington and hopes that the Trump administration will be able to deliver a decent Budget. The Dow futures, however, traded in the red yesterday.

A bit more than half of the STI's rise could be traced to the two banks, with additional support coming from Hongkong Land. The third bank, UOB, finished weaker.

Among other blue chips, index heavyweight Singtel ended $0.02 higher at $3.76 with 16.3 million shares traded.

Macquarie Warrants (MW) said Macquarie Research has maintained its "outperform" on the telco with a 12-month target of $4.32.

"Singtel remains Macquarie Research's top pick among the Singapore telcos for its diversified earnings base, which they believe should shelter it from the increased competitive pressures in the Singapore consumer space," said MW.

In the second line, two stocks displayed unusual movements - albeit in different directions - and were queried by the Singapore Exchange (SGX) before trading was halted.

Interior design firm Serrano's shares rocketed up $0.021 to $0.031 on volume of 47.6 million before the company requested for a halt at 12.25pm, while earlier in the day, commodities trader Noble Group's shares dived $0.165 or 28 per cent to $0.420 on volume of 79 million before trading was stopped at 9.36am.

Serrano replied in the afternoon, saying it did not know of reasons to explain the push on its shares.

For Noble, observers said the selloff was most probably because China's state-owned enterprise Sinochem was reported to have shelved its plan to buy a stake in Noble.

Adding pressure on Noble was news that ratings agency Standard & Poor's (S&P) has cut its rating for Noble from B-plus to CCC-plus with a negative outlook.

S&P also said it thinks Noble's capital structure is not sustainable.

In its May 19 US Economic Weekly report, "Will It Be Summer Break for the Fed?", Bank of America-Merrill Lynch (BoA-ML) said market participants remain convinced that the Fed will hike in June, despite the recent stress in the markets.

"We are less sure. We are particularly concerned by the string of weak inflation data which will likely prompt the Fed to revise down their forecasts for this core inflation this year," said BoA-ML, adding that all eyes will be on upcoming Fed communications, starting with Wednesday's release of the minutes of the most recent Federal Open Market Committee meeting.

Goldman Sachs Asset Management (GSAM) in its May 19 Fixed Income weekly said in the US, political developments and a weak core consumer price index reading for April led to outperformance in rates and weakness in the US dollar.

"We believe recent softness in inflation is driven by transitory factors and we continue to expect two more rate hikes this year. We are underweight US rates," said GSAM.

Bank of Singapore's chief investment officer Johan Jooste said in his May 23 report, "It's Still the Politicians ...", that although market volatility measures are low, surveys show that many private investors are "as worried as they have ever been" about markets.

"This may be because of a never-ending stream of bad news flow of the political variety," said Mr Jooste.

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

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