Business

STI up 0.9% on easing geopolitical worries

OCBC and DBS lead gains; several property stocks also rise

Share prices in the local bourse rose alongside most major Asian stock markets as they retraced last week's losses partly fuelled by expectations that the latest weak inflation data out of the United States could see the Federal Reserve staying on the dovish side.

That, coupled with some easing of the US-North Korea tension, helped push the key Straits Times Index (STI) up 29 points or 0.9 per cent to 3,308.69 yesterday, with 2.2 billion shares worth $1.2 billion traded.

Hong Kong's Hang Seng climbed 1.4 per cent, while South Korea's Kospi inched 0.6 per cent higher.

China's Shanghai Composite finished 0.9 per cent up, snubbing disappointing macro data that was released on retail sales, fixed asset investments and industrial production.

OCBC Treasury Research said the recent data out of China could suggest that growth in the world's second-largest economy may have peaked in the first half of 2017.

Japan's Nikkei 225 bucked the trend, losing nearly one per cent, failing to draw inspiration from news that the economy expanded better than expected.

Last week, equity markets were spooked by US President Donald Trump's war of words with North Korea over its nuclear programme, with Wall Street's fear gauge - the VIX volatility index - surging over 70 per cent since the week's start.

Still, US equities snapped a three-day losing streak last Friday, but suffered their worst weekly loss since March.

The nervousness over the geopolitical rift now seems to have abated somewhat following assurances from senior US national security officials on Sunday that a military confrontation with North Korea was not imminent.

"The tension between the two countries is likely to fade after the sudden flare. However, given that Tuesday is North Korea's Liberation Day, investors will remain on the defensive as Pyongyang uses big events like this to make provocative statements and possibly activities," remarked Hussein Sayed, FXTM chief market strategist.

Evidently, no one dares to rule out further turbulence.

Geopolitical concerns will likely still be on the table for the coming weeks, said OCBC Research.

"Expect market sentiment to remain cautious, thus capping potential rallies in growth-related assets, while supporting safe haven demand."

"Beyond geopolitical concerns, sentiments are expected to be driven by upcoming data prints, especially European Commission's (second-quarter) GDP print, US initial jobless claims and industrial production in the week ahead," the house added.

At home, gainers marginally trumped losers with 234 counters up and 230 counters down.

Two banking stocks led the gains, with OCBC Bank rising 18 Singapore cents or 1.6 per cent to $11.38 and DBS Group advancing 25 Singapore cents or 1.2 per cent to $21.05.

On the other hand, UOB declined 10 Singapore cents or 0.4 per cent to $24.10.

In its latest report on Singapore banks, Nomura Research said market participants were focusing "too much on noise", with fundamentals taking a back seat as the banks' improved first and second-quarter results have indicated.

Several property stocks also enjoyed gains with CapitaLand up eight Singapore cents or 2.2 per cent at $3.78 and City Developments gaining 39 Singapore cents or 3.5 per cent to $11.53.

Olam International rose three Singapore cents or 1.5 per cent to $1.98. The agribusiness firm reported a 29 per cent rise in net profit to $148m for the second quarter on the back of a 31 per cent increase in revenue to $6.52b.

Asian Pay Television Trust gained 0.5 Singapore cents or 0.9 per cent to 58 Singapore cents.

The trust yesterday reported a 29 per cent fall in quarterly net profit to $11.4m on the back of a 6 per cent rise in revenue to $83.1m.

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

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