Business

Early momentum fades, STI ends lower

Turnover is the highest so far this week at 2.1b units worth $1.3b; Falcon Energy, Mencast queried by SGX

Slight follow-through buying of the banks yesterday helped the Straits Times Index record a 14-point rise to an intraday high of 3,250, but the momentum was lost once the Dow futures dipped into the red and the index finished the day a net 9.01 points weaker at 3,227.14.

Helping in the morning push was a Wednesday bounce on Wall Street that came on hopes that the Trump administration's tax reform plans would boost the economy and corporate sector.

Among the proposals is a reduction in corporate tax from 35 to 20 per cent.

Turnover here was 2.1 billion units worth $1.3 billion, the highest of the week so far. The advance-decline score excluding warrants was 184-212.

Shares of land transport firm ComfortDelGro have been weak of late, partly because of increased competition in the taxi segment from new entrants such as Grab and Uber.

Yesterday, however, ComfortDelGro managed a $0.045 rebound to $2.04 on volume of 16.7 million.

Among the top actives was newly listed APAC Realty, a real estate service provider that operates a real estate brokerage in Singapore under the ERA brand.

The counter ended at $0.76 on volume of 39.3 million, $0.10 or 15 per cent above its $0.66 offer price. Its public tranche of 4.4 million shares was 29 times subscribed.

Elsewhere among the top actives, Falcon Energy's shares surged $0.029 or 67.4 per cent to $0.072 with 20.4 million traded, prompting a query from the Singapore Exchange (SGX).

The company had not replied by the time trading closed.

Also queried by the SGX was offshore and marine firm Mencast Holdings, whose shares jumped $0.029 or 17.7 per cent to $0.193 on volume of 2.1 million before the company requested that trading be halted pending an announcement.

On global growth outlook, Macquarie Warrants (MW) quoted Macquarie Equities Research (MQ) as saying in a report that although a momentum peak is likely to occur soon as hard commodity prices have fallen over recent weeks, the outlook has brightened considerably over recent months, with growth likely to remain above average over the remainder of this year and into next year.

"In terms of risks, many worry about an impending 'bond bust', as good growth combines with tapering by the European Central Bank and moves to reduce the balance sheet by the Fed," said MW.

"However while higher yields are likely over time (supply and demand does still work), MQ expects long yields to remain relatively low for some time yet, as structural constraints combine with the Bank of Japan to keep the curve anchored.

"To MQ, China remains the bigger risk, but major policy action is unlikely until next year once the political transition is complete. Low rates and good growth could see equities continue to climb, while commodities will remain mixed, with metals coming under pressure and oil range bound."

DBS chief investment officer Hou Wey Fook in his CIO Insights 4Q 2017 does not see the cusp of a bear market.

"Despite stretched valuations, the fundamental backdrop of synchronous global growth with low inflation is positive," he said.

"Fund flows are also supportive as global investors are flushed with liquidity and in constant hunt for investments away from record-low yielding government bonds."

As for the tax plan, Rabobank in its "Trump on tax" report said it was unlikely that the plan would permanently boost economic growth.

"In addition, the benefits to corporates (of lower corporate tax rates and more favourable rules on expensing of capital investments) are less generous than in previous Trump proposals. Trump's plan is light on detail and seems to be far from being revenue neutral.

"This suggests that any progress through Congress would be slow, long and painful."

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

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