Business

DBS, ThaiBev shore up ST Index

Benchmark up 8.21 points after trading sideways for most of the day

After gaining almost 10 per cent since the start of the year, it's perhaps natural to expect the Straits Times Index (STI) to undergo some sort of pullback or consolidation.

Such was the case yesterday when the index traded sideways for most of the day, though it did manage to close a net 8.21 points higher at 3,096.69.

Turnover remained elevated at 3.3 billion units worth $1.37 billion and, excluding warrants, there were 274 rises versus 215 falls.

Banks have provided most of the fuel for the index's rise over the past year on the understanding that rising interest rates will be good for their bottomlines.

So it was yesterday that DBS, despite reporting a 9 per cent fall in Q4 profit to $913 million versus consensus of $1.014 billion, still managed a $0.31 rise to $18.54 on volume of eight million shares, albeit on a cum-dividend basis.

This added six points to the STI with a further two points coming from Thai Beverage's $0.02 rise to $0.96 with 46 million shares traded.

However, OCBC Investment Research described DBS's figures as coming in below expectations.

"Overall, the worst in terms of the oil and gas sector appears to be over, although the outlook is still dismal," said the broker.

"We have rolled our valuations (for DBS) into FY17 and using the improved P/B of 1.05 due to recent re-rating of the banking sector, our fair value estimate increases from $17.83 to $18.99. As the upside is less than 10 per cent, we are maintaining our hold rating, but will turn buyers at $17.80 or lower."

S&P Global Ratings in a report on Wednesday titled "2017 will be another subdued year for Singapore banks" said growth will remain flat for banks this year, further weighing down asset quality and creating pressure on profitability.

"The continued subdued performance will reflect weak domestic economic growth, global trade uncertainties, and a slowing China," said credit analyst Ivan Tan.

DIP

"The asset quality of the three Singapore banks we rate - DBS, OCBC and UOB - has only recently started to dip. The non-performing loan ratio of these banks increased to 1.4 per cent as of Sept 30, 2016, from 1.1 per cent as of Dec 31, 2015.

"We believe Singapore is at the early stages of a downturn in the credit cycle, and things are likely to get worse in 2017 and 2018."

In the business trust sector, RHT Health Trust's units bounced $0.045 to $0.84 on volume of 6.7 million shares after suffering sharp falls in recent days.

The company was queried by the Singapore Exchange on Wednesday on reasons for the plunge and has replied in the negative.

Also queried on Wednesday was precision components maker AEM Holdings, after its shares jumped $0.125 or 11.5 per cent to $1.21.

The company yesterday replied that it has been providing regular announcements on its sales order book balance, which has increased from $38.3 million as at Oct 5, 2016, to $84.5 million as at Jan 1, 2017.

Its shares ended $0.015 lower at $1.195 on turnover of 323,000 shares.

In Goldman Sachs Asset Management's February Macro Insights, chief investment office Steve Barry's thought was that aggregate US equity valuations were elevated and the combination of heightened policy uncertainty and US President Donald Trump's provocative leadership style could cause volatility to trend higher.

"We are particularly focused on the potential for the administration to impact global trade channels via the tax code, specifically with some form of border-adjustment tax...," said Mr Barry.

"Companies may soon face major decisions on issues such as whether to bring back industrial production to the US and repatriate profits."

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

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