Business

Local market unmoved by rallies in US

DBS, UOB drag STI down, but broad market manages 202 rises versus 194 falls

Trading yesterday followed on the lines of the two previous sessions this week, with prices drifting most of the day.

Unlike Tuesday, the bias this time was to the downside as the local market once again appeared unimpressed with the "relief rallies" that lifted Wall Street to consecutive all-time highs on Monday and Tuesday.

The Straits Times Index (STI) ended with a 5.33-point loss at 3,230.36 largely through weakness in DBS Bank and United Overseas Bank, though the broad market did manage 202 rises versus 194 falls excluding warrants.

So the session was more mixed than weak.

Turnover amounted to 1.8 billion units worth $1.1 billion, the highest so far this week.

Western markets have rebounded this week on relief that North Korea did not undertake missile tests to mark its founder's day on Monday, and the damage from Hurricane Irma in the US was not as bad as feared.

In his morning commentary, Mr Rob Carnell, head of Asia research at ING Asia-Pacific, said the rise in stocks and bond yields and the selling of safe havens such as the Japanese yen will probably not last.

TENSION

"One thing that might trigger a renewed bout of global tension is the threat from US officials, including Treasury Secretary Steven Mnuchin, that the US would restrict certain Chinese banks' access to the US financial system unless they cooperate in shutting off finance to North Korea," said Mr Carnell.

"Were this US threat to be carried out, we are fairly sure China would retaliate in ways that would also hurt the US economically.

"It is not only the US that can play at trade wars."

"It is not only the US that can play at trade wars."

Mr Rob Carnell, head of Asia research at ING Asia-Pacific.

Apart from weakness in the banks, the STI was also dragged lower by falls in Jardine Matheson and CapitaLand.

Keppel finished two cents higher at $6.29 on volume of 2.2 million.

The Singapore Exchange yesterday queried electronics firm Venture after its shares jumped $1.50 or 10 per cent to $16.75 with 3.9 million done.

Venture responded by saying that other than what it has already announced, it did not know of reasons for the interest.

Macquarie Warrants said Macquarie Equities Research (MQ) has raised its STI target from 3,235 to 3,400, driven equally by an improving top-down picture and aggregated bottom-up price target upgrades from MQ's team.

"While Singapore's expected earnings per share growth remains among the region's lowest, its defensive attributes and 4 per cent yield should prove attractive amid current geopolitical uncertainty," it said.

"Financials is MQ's most favoured sector.

"MQ's top picks are a blend of compounders and valuation plays."

Bank of America Merrill Lynch reported that the share of investors taking out protection against a correction in equity markets saw the largest monthly increase in 14 months, and optimism over growth continues to sag with just 25 per cent of investors expecting a stronger economy in the next 12 months, compared to 62 per cent at the start of the year.

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