Business

Jardine group, banks drag STI lower

Overall session mixed with 236 rises to 184 falls despite Wall Street's all-time closing high on Tuesday

The Straits Times Index (STI) yesterday fell 9.43 points to 3,236.65, dragged lower by weakness in the Jardine group and the three banks.

Turnover was a weak 1.9 billion units worth $999 million. Excluding warrants, there were 236 rises versus 184 falls throughout the market, so trading was slightly more firm than the STI's reading might suggest.

The overall mixed session came despite yet another all-time closing high for all three major Wall Street indices.

Brokers here described current market conditions as "challenging", with only selected counters enjoying any form of meaningful interest.

The most actively traded index stocks were Genting Singapore and Golden Agri Resources, while the biggest drag on the STI came from a US$1 (S$1.36) fall in Jardine Matheson to US$64.07, which came with 121,300 shares traded, and cut three points off.

SIA Engineering stood out with a $0.25, or 7.2 per cent plunge, to $3.21 on volume of 10.2 million, a fall that drew a query from the Singapore Exchange.

The company said it was unaware of any reasons that could explain its trading activity, apart from a Bloomberg report that JP Morgan has offered to sell its entire stake of 38.9 million shares in the company.

Also queried was concert promoter UnUsUaL, whose shares jumped $0.05, or 10.2 per cent, to $0.54 with 6.8 million traded.

UnUsUaL said it is "looking at a certain corporate exercise" that has yet to be finalised.

On the interest rate outlook, Julius Baer economist Susan Joho said that with global growth picking up pace, the odds for a US rate hike in December have risen accordingly.

"While it is yet too early for a rate hike in the eurozone, lasting economic strength will likely warrant a reduction of the monthly asset purchases by the European central bank from the beginning of next year."

"The recovery appears genuine, with not only leading Germany but also peripheral eurozone economies such as Greece seeing moderate economic growth," she said.

Wall Street has been rising for various reasons, the latest being on hopes that the Trump administration's tax reforms will be passed.

Bank of Singapore's chief economist Richard Jerram said one problem with the proposals is that they will raise the deficit by far more than US$1.5 trillion to at least twice as much.

"That means the proposed 20 per cent corporate tax rate is more likely to end up as 25 per cent, but it also means lawmakers will need to be more aggressive in eliminating tax exemptions," said Mr Jerram.

Bank of America-Merrill Lynch said early estimates from the Committee for a Responsible Federal Budget suggest that the proposed tax plan would cost an additional US$2.7 trillion.

"Pressure from the deficit hawks could limit the size of the tax plan unless additional (and more controversial) revenue raising components are introduced," it said.

On Wall Street's march upward, Barron's quoted Todd Market Forecast as saying the market just keeps going in spite of being sharply overbought.

"Part of the reason is that underinvested institutions are under a lot of pressure to meet performance goals. In addition, earnings reports have been quite good,'' it said.

"The S&P 500 is extremely overbought. Five-day RSI (relative strength index) is at 90. You don't see that very often. But, the ultimate indicator (price) remains bullish. Just eyeball the chart. There is no way to consider that chart to be bearish."

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