Market up on Macron's election victory

The Straits Times Index (STI) managed a 7.25-point rise to 3,236.98 yesterday in response to the widely-expected news that Mr Emmanuel Macron, the market's preferred choice for president of France, had won Sunday's run-off against his rival Marine Le Pen.

Overall trading was slightly firm with 250 rises versus 211 falls excluding warrants, while turnover was a decent 2.6 billion units worth $1.34 billion.

The three banks were the main drivers of last week's surge on hopes that the worst is over for them.

DBS has been outstanding in this regard, though yesterday it dropped $0.12 to $20.30 with some 4.2 million shares traded.

In its daily newsletter, Macquarie Warrants (MW) said Macquarie Research (MQ) has singled out DBS as the bank with the most improved and best quality exposure among Singapore banks.

MQ also said DBS is most likely to surprise positively on loan loss provisions and earnings, is the biggest beneficiary of rising interest rates, has the lowest price-to-book value multiple and having the highest sustainable return on equity. MQ's rating for DBS is "outperform" and target is $21.

The day's most active stock was Addvalue Technologies, which rose $0.001 to $0.064 on turnover of 267.5 million shares.

The digital satellite communications firm said over the weekend that it has an initial order of about US$1m clinched from various customers globally for its latest generation maritime communications system, and is in discussion with potential customers for an additional order of about US$3.5m (S4.92m).

Credit Suisse's chief investment officer Asia-Pacific John Woods said in a note on France's elections that there could have been a small "relief rally" in Asia yesterday but this was unlikely to last as the Credit Suisse Investment Committee had assigned a 90 per cent probability of Mr Macron winning after the first round of the election.

"Going forward, uncertainty in the French legislative elections in mid-June will drive French market sentiment and we anticipate limited impact to Asian markets," he said.

Natixis Global Asset Management's chief market strategist David Lafferty said Mr Macron's victory represented an important victory in Europe's search for a durable expansion.

"Too often in recent years, self-inflicted wounds ranging from monetary policy hesitation, to the Greek Debt Crisis, to Brexit, have created unnecessary headwinds and higher risk premiums," said Mr Lafferty. "Europe has taken a much-needed step back from the brink."

Bank of America Merrill Lynch (BOAML) in its May 8 report, "Asian Earnings: overall revisions up but a pause looks imminent", said that after a six-year earnings downgrade cycle, analysts are revising up their estimates for corporates for several Asian countries with earnings per share growth estimates for Asia ex-Japan revised upwards from 11 per cent to 17.5 per cent for 2017.

"However, the leading indicators of Asia ex-Japan earnings growth - the US ISM (Institute of Supply Management), Asset Price Growth Indicator (which has an opinion on global growth), China's monetary conditions and China's credit multiplier - have peaked out and are rolling over.

"These factors suggest to us that the street's upward revisions to earnings will likely pause or roll over in the coming months. We note that these leading indicators lead earnings growth by about nine months; last August they suggested being bullish on Asia's earnings while now they suggest otherwise."

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