Business

Hopes for firm Wall St help STI gain 1.3%

Market also buoyed by investors who seem unfazed by prospect of third US interest rate hike this year

A 30-point rise in the Dow futures helped the Straits Times Index kick off the week and final quarter with a 42.19 point or 1.3 per cent gain to 3,262.1 yesterday.

Rises in the three banks, Singtel and Jardine stocks were the largest contributors, though volume at 1.3 billion units worth $906 million was not spectacular. Excluding warrants, there were 259 rises versus 139 falls so gains were broad-based.

Brokers said that Wall Street's optimism over proposed tax reforms underpinned the gains; one observed that "for one year since the US election, stocks have been going up non-stop to record high after record high".

Also a factor was that other than a slight blip towards the end of last month, investors appear unfazed by the heightened prospect of a third United States interest rate hike this year in December. In the federal funds futures market, the implied probability of this occurring is currently 70 per cent.

Higher interest rates mean higher bank earnings, so it came as no surprise that all three banks finished sharply higher yesterday, their total contribution being about 19 points towards the STI's final reading.

Also noticeable was that technology stocks took off in response to a strong Friday session for the Nasdaq. Gains here were led by Venture Corp which ended $0.42 or 2.4 per cent higher at $18.06 on volume of 1.2 million. Others from the sector that finished higher were Hi-P, Valuetronics and iFast.

In the oil and gas sector, the main development was an announcement by Rotary Engineering that it would seek a voluntary delisting at $0.46 per share. It said that the delisting would allow the management "greater operational flexibility to manage the business of the company, optimise the use of its management and capital resources and facilitate the implementation of any operational change". Rotary's shares resumed trading after a halt with a $0.04 rise to $0.45 on volume of 7.4 million.

Shares of airport services provider Sats rose $0.05 to $4.66 on volume of 2.1 million. OCBC Investment Research, in upgrading Sats to a "buy", noted that Changi Airport had posted yet another month of solid traffic growth for August from a year ago - passenger throughput grew 7 per cent, aircraft movements rose 4.9 per cent and airfreight movements rose 10.7 per cent.

"The positive data out of Changi Airport bodes well for Sats as we estimate it handles close to 80 per cent of the traffic throughput there... with its share price having fallen about 3 per cent over the past two weeks, we upgrade Sats from hold to buy on valuation grounds, with an unchanged fair value of $5.05. We believe the recent price weakness presents opportunity to accumulate with a decent FY18F yield of about 3.9 per cent," said the broker.

In the shipbuilding sector, shares of Yangzijiang Shipbuilding ended $0.01 higher at $1.44 on volume of 7.2 million. The Singapore Exchange's investor education portal My Gateway, in its latest market update, reported that Yangzijiang was the STI's strongest constituent in Q3 2017, with its 20.2 per cent total return over the quarter taking its 12-month total return to 97 per cent.

"This is a reversal from last year when Yangzijiang was the STI's least performing constituent," said My Gateway.

Other top performers in the third quarter were Global Logistic Properties, Genting Singapore and UOL Group.

"DBS Group Holdings was the fifth best performing STI stock over the past 12 months with a 39.4 per cent total return," said My Gateway.

As for US interest rates, analysts will be looking this week at the September jobs report, though they do not expect weak data to stop the US Federal Reserve from acting in December.

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

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