Business

STI buoyed by banking share rally

Extended gains of US financial shares lifts Dow to another record close on Tuesday

Singapore banking shares continued to lend their weight to the benchmark Straits Times Index (STI), pushing it 10.72 points higher by the end of yesterday's session, even as investors wondered about the impact of Italy's referendum and today's policy meeting of the European Central Bank (ECB).

The index closed up 0.36 per cent at 2,959.84, after retreating from an intraday high of 2,961.40. Turnover amounted to 1.8 billion units worth $1.2 billion, shy of the $1.3 billion average seen since Mr Donald Trump won the US presidential election on Nov 8.

The advance-decline score of 222 to 194 pointed to a firm finish.

Yesterday's strong showing from banking counters came on the back of the extended gains of financial shares in the US that drove the Dow to yet another record close on Tuesday.

Wall Street stocks continued to reap the benefits of a Trump rally, even though it was initially held back by weaker energy stocks following the first retreat in oil prices in five days since Opec agreed on Nov 30 to cut output.

OCBC Investment Research said continued gains on Wall Street overnight could keep the local sentiment fairly buoyant, but the recent price action suggests that the market may be due for a technical correction soon.

"We note that the daily relative strength index continues to hover above its overbought region," he said, noting however that other factors continued to look pretty positive.

"As such, we peg the initial hurdle at 2,955, the inability of the index to clear this level could send it back towards 2,925. We peg the next resistance and support levels at 2,970 and 2,900, respectively."

Another key index mover was Singtel, which rose $0.04 to end the day's trade at $3.78, with 14.9 million units changing hands. It contributed 3.4 index points.

The telco's Australian subsidiary, Optus, has clinched a three-year, A$40 million (S$42.3 million) contract extension with specialist security provider Suretek to deliver 1345 Securecall services over the Optus network through the end of 2020.

Of the banking shares, DBS and OCBC contributed a combined 4.4 points to the index. DBS rose $0.16 to $18.32 on volume of almost 9.4 million, while OCBC closed up $0.03 at $9.30 on 6.8 million.

However, UOB ended the day unchanged at $20.83 on volume of almost 3 million.

Genting Singapore, whose stock was buoyed by the sentiment that casinos could be legalised in Japan, was one of the most active on the STI with over 60.5 million units traded. The stock finished up $0.045 at $1.025.

Within the region, major indices such as Hong Kong's Hang Seng and Japan's Nikkei also ended the trading session on a higher note.

Richard Turnill, managing director and global chief investment strategist for BlackRock, said the ECB is the focus this week as the market looks for clarity on whether the central bank will begin tapering asset purchases next year.

He added that "Chinese data will provide more details on whether capital outflows have accelerated and may show further evidence of reflationary trends".

David Lafferty, chief market strategist at Natixis Global Asset Management, wrote in his capital markets note that he expects next year to be one of increased volatility.

"While markets have reacted favourably towards Trump's growth agenda in the US, this weekend's dust-up with Taiwan/China certainly won't be the last, as his inexperience and bombastic style should provide plenty of thrills and spills for global investors," he said.

"Combined with elevated valuations across stocks globally, a Fed on the verge of hiking rates, and interest rate fears spreading across bond markets, it's difficult to forecast a reduction in asset volatility. After seven years of solid returns across both stocks and bonds (post-great financial crisis), we expect investor emotions to be tested more severely in 2017."


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