Local banks push STI up 0.9%

An eighth consecutive all-time high for the Dow Jones Industrial Average on Tuesday triggered a large push on the local banks yesterday, propelling the Straits Times Index (STI) up 28.01 points, or 0.91 per cent, to 3,122.20.

The overall volume amounted to a decent 2.6 billion units worth $1.47 billion.

The broad market, excluding warrants, recorded an advance-decline score of 290-196 - perhaps not as firm as the index's reading suggested. The unit value traded was $0.57.

All three local banks surged higher, with UOB the top performer, with a $0.45, or 2.1 per cent, jump to $21.77 on volume of 4.1 million.

OCBC was next with a $0.18, or 1.9 per cent, rise to $9.66 with 8.4 million done.

DBS ended $0.29, or 1.6 per cent, firmer at $18.75, with 6.6 million shares changing hands.

Brokers were unable to explain the sudden push, and would only speculate that the banks' earnings would improve with rising interest rates.

In the oil and gas sector, Keppel Corp ended $0.16 higher at $6.73 with 6.8 million traded.

OCBC Investment Research said that with oil prices improving, it is less likely that Keppel will continue with impairments unless there is a sudden drop in oil prices again to the US$30 (S$42.50) range.

A broker said: "The property division continues to enjoy good profits, and management is still expecting sales figures to be healthy for its key markets.

"We value Kep's O&M (offshore & marine) business at 1x P/B (price/book), which is not demanding; upside risk comes from better-than-expected new order flow from non-drilling solutions...

"We also ascribe a 1x P/B to the group's property segment, given the positive outlook for the group's key markets, and update the valuations of other entities. Our fair-value estimate thus rises from $6.26 to $7.40. Upgrade to 'Buy'."

Threadneedle Investment's global head of equities Mark Burgess said the potential impact of US President Donald Trump's policies are occupying his thoughts.

"We have been looking at what the outcome will be from expected fiscal easing and a more hawkish Fed, as well as Trump's migration policies and trade barriers," he said.

"Taking all the above into account, Trump in the round is likely to be neutral to negative for GDP growth, which means the market is clearly giving him the benefit of the doubt at this point."

S&P Global Ratings said trade flows and Purchasing Managers' Indices (PMIs) in the Asia-Pacific economies drifted higher early this year amid low and stable inflation.

Paul Gruenwald, S&P's Global Ratings' chief economist for the Asia-Pacific, said: "The Asia-Pacific region remains in a wait-and-see mode on the trade and macro policies of the new US administration."

Bank of Singapore's chief economist Richard Jerram said in his report yesterday that the US market has risen on hopes of tax cuts and less regulation, but increasingly, there are questions over whether Mr Trump can deliver.

"Despite the frenzy of activity in Washington, so far we have not seen much action on his economic agenda," said Mr Jerram.

"Trump has promised a 'phenomenal' tax plan, with markets expecting details in his speech to Congress on Feb 28.

"However, the complexities of tax reform and the conflicting priorities of different interest groups could make it difficult to reach an agreement.

"Tax reform cannot be pushed through with an executive order. It involves painstaking passage through Congress, where the Republican majority in the Senate looks fragile."

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