Business

STI drifts lower despite rallies elsewhere

No reason for STI's lethargy emerges, other markets said to be relieved N Korea did not fire missiles

A 120-point jump in the Dow futures, a strong session in Hong Kong and a firm opening for Europe failed to lift the local stock market yesterday.

Instead, the Straits Times Index (STI) drifted to a loss of 0.05 of a point - although the consolation was that the broad market managed 214 rises versus 192 falls, excluding warrants.

No reasons could be found for the lethargy that resulted in low turnover of 1.4 billion units worth $884.4 million.

For the rally in other markets, however, the explanation offered was the relief that North Korea celebrated its founder's day over the weekend without fresh missile launches.

Among the day's most active counters were the shares of media and property firm Singapore Press Holdings, which publishes titles such as The Business Times.

The stock finished with a $0.12 or 4.4 per cent loss at $2.62 on heavy selling of 19.3 million shares.

There was no fresh announcement to account for the fall, but a possible reason was a Friday downgrade by CIMB, which had cited downside risks and a $2.38 target price.

It had said: "Core media earnings continue to be in a structural decline, with little bolster from its investments and diversification into property and healthcare. We also see risk from further dividend cuts and impairments..."

The day's most active stock was Rowsley Holdings, which added $0.002 at $0.114 with 49.5 million traded.

Index stocks which were active included Thai Beverage, Yangzijiang Shipbuilding and Genting Singapore.

Bank of America-Merrill Lynch, in its Sept 8 US Economic Weekly headlined "In the path of a hurricane", said Hurricane Harvey may shape up to be the costliest natural disaster in history.

"We expect to see the impact of Harvey in upcoming economic releases, including jobless claims, manufacturing and consumer-related data.

"Factoring in Harvey, we take down our Q3 GDP (gross domestic product) tracker by 0.4 percentage points to 2.5 per cent. Hurricane Irma may be an additional drag."

Bank of Singapore's chief economist Richard Jerram in his Economics Research report titled "Assessing disaster damage", said that although natural disasters can be very bad news for small countries, they cause little lasting damage to large, diversified countries like the US because of savings, insurance and government aid.

Hurricane damage is unlikely to have much impact on Fed policy, he said.

"The balance sheet run-off is due to be announced at the next meeting on Sept 19-20, while the Fed still has to wait months to decide whether slippage in inflation is enough to skip a planned rate hike in December."

Schroders, in its latest Talking Point, said market complacency could bolster the case for gold; it added that the precious metal has been held back by factors such as a rebound in real rates and increased stability in the Chinese yuan, which has dampened Chinese near-term investment demand for gold.

"But these are short-term factors, which do not change our view that gold has entered into a new bull market," said Schroders, adding that the S&P 500's valuation is expensive, using a variety of measures.

Oanda's senior market analyst Jeffrey Halley, in his Precious Metals daily, said the recent pullback in gold is welcome and could have some further room to run.

"For now, gold appears to be making a welcome technical correction within a larger, longer-term bullish picture."

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

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