Business

STI jumps 1.3% after 'window-dressing'

Local bourse gets 310 rises on penultimate day of second quarter

Yesterday, the eve of the second quarter's final day, the Straits Times Index managed an impressive 42.95 points, or 1.3 per cent jump, to 3,258.65 as buyers drew inspiration from a large overnight rally on Wall Street.

The index's gains were led by the banks and Singtel, and observers said some of the push could have come from funds indulging in a spot of quarter-ending "window-dressing" or "portfolio rebalancing".

Whatever the case, volume amounted to 1.7 billion units worth $1.2 billion - the highest this week. Excluding warrants, there were 310 rises versus 155 falls throughout.

Units of Croesus Retail Trust, which owns assets in Japan, ended $0.01 higher at $1.185 on volume of 22.4 million following a takeover offer at $1.17 a unit from Blackstone.

PhillipCapital said the expectation of continued loose monetary policy by the Abe government and a recovering economy supported by improving consumption and tourism ahead of the Tokyo 2020 Olympics are likely factors behind the offer.

"At an 8 per cent premium to our last target price of $1.08 and a 27 per cent premium to the latest NAV (inclusive of the $0.04 dividend), the offer price is close to the average premium for listed retail J-Reits," it said.

"We deem the buyout offer a fair price and advise investors to accept the offer."

RHB also said the offer is fair and recommended investors accept it "as it allows them to realise their investment at an attractive price".

Elsewhere, shares of medical firm TalkMed rebounded $0.035 to $0.68 on volume of 2.3 million after they were sold down by $0.10 on Wednesday on news that chief executive officer Ang Peng Tiam has been suspended for eight months.

RHB called a "buy" on TalkMed, saying the suspension is a "short-term roadblock in the group's long term future".

"We also think that this suspension is likely to give Dr Ang time and space to focus on Talkmed's future direction. It would also allow him to focus and execute any M&A plans in the pipeline," it said.

"However, we do expect earnings to be negatively impacted by 18 per cent for FY17F and have lowered our FY17 estimates accordingly. As a result, our discounted cashflow-backed target price is lowered to $0.73 based on a 30x FY18 forecast price/earnings."

DBS chief investment officer Lim Say Boon in his Tuesday report said US equities' cyclically adjusted price-to-earnings ratio is now approximating two standard deviations above a 134-year average.

"That's dangerous overvaluation territory - a market priced for perfection. Against that, expectations of what US President Donald Trump can do for US stocks now appear unrealistic, considering that he has been politically damaged and is distracted by investigations into whether he had attempted obstruction of justice..." he wrote.

He added that Asian stocks offer better value.

"Asia ex-Japan equities could be coming into a 'sweet spot' with economic growth stabilising after years of decline, inflation taming, and economists' forecasts rising since the start of the year," he added.

"Corporate earnings are still at an early stage of recovery from the protracted recession that ended late last year."

Macquarie Warrants said Macquarie Equities Research's (MQ's) detailed and proprietary analysis of US job trends at the national, state and subindustry levels suggest slack is rapidly diminishing.

"The economy is on the cusp of full employment as labour shortages are becoming more widespread and are increasingly restraining output. MQ reduces MQ's real gross domestic product growth forecasts for 2018 to 1.6 per cent," it said.

"There are no changes to MQ's 2017 (2 per cent) and long-term (1.4 per cent) estimates."

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