Business

STI ends flat, dragged by heavyweights

Expected NODX rebound in October figures fails to lift sentiment on a day of mixed trading

Singapore equities struggled most of yesterday to climb new highs despite a strong earnings season. They finished about where they started.

The benchmark Straits Times Index (STI) lost 0.97 points or 0.03 per cent to end flat at 3,419.13, dragged by shares of index heavyweights DBS, Singtel and Hongkong Land.

DBS alone lost over 5 index points, closing at $23.75, down 26 cents - a sign of correction.

Turnover came in at 2.2 billion worth $1.2 billion. Excluding warrants, gainers trumped losers 251 to 217.

Even an expected rebound in Singapore's non-oil domestic export (NODX) growth in the October trade figures due on Friday failed to lift sentiment.

Ms Radhika Rao, an economist at DBS Group Research, said: "The headline number is expected to register 8 per cent year-on-year amid a resumption in the electronics rally and a rebound in biomedical export sales after the industry-specific plant shutdown last month."

Cosco Shipping International's counter was among those that made it to the day's most active list, with over 81 million units changing hands. The stock of the company, which earlier this month made a $488 million cash takeover bid for Cogent Holdings, closed 10.5 Singapore cents higher to $0.545.

ComfortDelGro's shares jumped 5 per cent, adding 10 Singapore cents to end at $2.10 on a volume of 18.5 million. Last Friday, the transportation giant said its net profit fell 8.2 per cent to $80.1 million for the third quarter, with the core taxi business dented by private-hire competition.

OCBC Investment Research maintained its 'hold' call on the stock with a lower target price of $2.05, saying it expects the taxi margin to decline gradually due to the strong competition from Grab.

Still, brokers have raised ComfortDelgro's FY17F/18F Patmi forecast though they lowered the earnings before interest and tax (Ebit) margins assumptions for taxi business and bus business beyond FY18F.

Across the region, profit-taking took place in Tokyo's stock exchange on the back of US tax reform jitters, while Hong Kong's Hang Seng closed up, led by China's announcement last week that it was lifting limits on foreign ownership in the financial sector. Korean, Australian and Malaysian shares fell, while New Zealand equities rose.

Goldman Sachs Asset Management said US tax reform remains in focus although the timing and scope of policy changes remain uncertain - especially after the Senate Republicans released their version of a bill which contains key differences from the House version released last week, including delaying a corporate tax rate cut by one year to 2019.

"From a macro perspective, we think the key consideration is the extent to which tax changes will widen the deficit. At the micro level, we see potentially offsetting impacts, though a corporate tax rate cut will likely serve as a cash flow tailwind," Goldman Sachs said.

Meanwhile, incoming US Federal Reserve chairman Jerome Powell will have his plate full when he takes over from Janet Yellen.

Mr Erik Weisman, chief economist at MFS Investment Management, said: "US and global growth rates have risen above potential, domestic and international labour slack continues to decline rapidly, but wage and consumer inflation remain quiescent. Certainly, this constellation of macroeconomic dynamics is much preferred to a world with weak growth and declining rates of inflation."

Mr Weisman believes Mr Powell is likely to tighten monetary policy gradually, "letting the US economy run above potential until he actually sees demand-push inflation".

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