Business

Session mixed ahead of Trump's tax plan

STI slips 2.4 points even as gainers beat losers 255 to 207 in the broader market

A cautious trading session yesterday ended with the Straits Times Index 2.4 points weaker at 3,171.36 on moderate turnover of 1.8 billion units worth $1.1 billion.

An overnight fall on Wall Street due to scepticism over the Trump administration's tax plans was the main reason behind a somewhat-dampened sentiment, though the broader market still managed an advance-decline score of 255-207, excluding warrants.

Now that risk from France's elections appear to have subsided - at least until May 7 when the second round is held - markets turned their attention to US President Donald Trump's tax plan, which he has repeatedly promised would be "phenomenal" with "massive" cuts.

After a few details were unveiled on Wednesday, US newspapers described it as likely to have been conceived "on the back of a napkin".

NO SUPPORT

It also quoted Capital Economics' Paul Ashworth as saying that the plan would never be approved.

"This plan is so costly that it is hard to take seriously and, if anything, it leaves us more sceptical that even a modest package of tax cuts will eventually pass Congress early next year," Mr Ashworth was quoted as saying.

"Nearly six months after the election, the administration's tax proposals amount to less than a single side of paper. Neither the Democrats nor Republican deficit hawks will support these proposals..."

In the property sector here, shares of CapitaLand rose $0.04 to $3.76 on volume of 32 million.

The company on Wednesday reported a 77 per cent jump in first-quarter profit to $386 million, which was aided by a 
$161 million gain in divestment of its 45 units of luxury condominium The Nassim.

Macquarie Warrants in its daily newsletter said that Macquarie Equities Research or MQ has an "outperform" rating on CapitaLand with a target price of $4.32.

"MQ expects CapitaLand to reap the benefits of scale in its serviced apartment and shopping mall business with more management contracts to drive higher fee income.

RECURRENT INCOME

Approximately 77 per cent of assets produce recurrent income and major projects under development will come on stream over the next two years," said MW.

"Shares are attractive on 0.88 times price by volume and at a 32 per cent discount to MQ's revalued net asset value."

OCBC Investment Research, in the meantime, said it was maintaining its "buy" on CapitaLand with $4.07 fair value.

On the French elections, polls suggest that Mr Emmanuel Macron would beat Ms Marine Le Pen in the May 7 runoff.

Schroders issued a Talking Point titled "What a Macron victory will mean for Europe's economy and equities" in which chief economist and strategist Keith Wade said that Mr Macron's "left-leaning centrist position" and redistributive policies on tax and benefits could provide a small uplift to growth.

REVIVAL

"He is also very pro-EU, so perhaps we will see a revival in the France-Germany axis and more talk of integration.

"These are all quite market-friendly policies."

Mr Martin Skanberg, Schroders' fund manager for European equities, said that there was plenty of anecdotal evidence that investors have been waiting for some clarity around the French election before increasing exposure to Europe.

"Not only have there been large moves... but I think the scene is also set for the longer-term outperformance of European equities," said Mr Skanberg. "There is ample room to see a rotation back into risk assets and into global equities.

"Within global equities, this means probably the eurozone, which looks particularly attractively valued."

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

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