Business

STI moves sideways as tech stocks swing

Broader market continues to decline, with losers outnumbering gainers 287 to 175; dividend plays in focus for the session

Crabs have been unleashed on the Singapore Exchange (SGX). And we're not just talking about No Signboard, the pepper crab restaurant with beer ambitions that spent its first day of trading shuffling up and down.

The benchmark Straits Times Index is also moving sideways.

It fell as much as 20 points but clawed its way back to close at 3,433.54 points, down 5.45 points or 0.16 per cent.

The broader market continues to decline, with losers outnumbering gainers 287 to 175.

But significantly heavy trading was seen, with some 2.9 billion shares worth $2.7 billion changing hands.

Here are a couple of themes to watch.

TIRED TECH

Across the region, tech stocks fell after an overnight slump in counters such as Facebook, Amazon, Netflix, Alphabet and Apple. In Singapore, contract manufacturers and precision engineering firms fell in sympathy.

Apple supplier Hi-P International was down 5.9 per cent to $1.75, semiconductor components manufacturer UMS ended 5.6 per cent lower at $1.01, and Intel test handling machine supplier AEM was 4.8 per cent lower at $3.16.

Even contract manufacturing giant Venture Corp fell to as low as $20.37 before closing at $21, up 1 per cent.

Allied Tech bucked the trend by rising 17 per cent on heavy trading, though the micro-cap stock is in the decidedly less sexy business of printer and copier components.

An investor by the name of Lim Tah Hwa had snapped up 114 million shares or 8.44 per cent of the firm off-market on Tuesday, at $0.062. He is now sitting on hefty paper gains, for the Catalist-listed counter last traded at $0.084.

YIELD STOCKS MOVE

Significant trading activity occurred in some favourite dividend stocks such as the three banks and six others: Singtel, ComfortDelGro, NetLink NBN Trust, and blue-chip real estate investment trusts (Reits) CapitaLand Mall Trust, CapitaLand Commercial Trust and Ascendas Reit.

These nine counters alone accounted for a whopping $1.1 billion of trades - enough to make SGX happy on a slow day.

Why are yield stocks significant? The long end of US rates shot up overnight after outgoing Fed chair Janet Yellen sounded an optimistic note on the US economy.

US 10-year Treasury yields went from 2.33 per cent to 2.39 per cent. If you can get higher yields on safer government bonds, you probably won't need to take that much additional risk on dividend stocks.

CapitaLand Commercial Trust is notable for adding three cents to $1.89 on 65 million shares traded.

The counter is now trading well above its adjusted net asset value of $1.82, a far cry from the last two years where it was trading at a 10-20 per cent discount.

What gives? Investors are very optimistic that prime office rents are going up after a long decline, due to an improving economy and limited new supply coming online.

But at least one house is cautious. Major office Reit yields are 5 per cent or less, pointed out OCBC Investment Research in a Thursday report. So the recovery is probably well priced in, it said.

Overall, it thinks Reit valuations are stretched and it maintains a "Neutral" call going into 2018.

Reit investors in Singapore are, in aggregate, paying just 374 basis points (3.74 percentage points) extra for Reits over yields on Singapore 10-year bonds. That difference, or spread, is 1.3 standard deviations below the five-year average.

However, it does have a few "Buy" calls on Frasers Centrepoint Trust, Frasers Logistics and Industrial Trust, Mapletree Greater China Commercial Trust and Mapletree Logistics Trust.

Markets go up and down, but dividends are forever. In the investing game, ultimately, you can't hide in your crusty shell.

For full listings of SGX prices, go to http://btd.sg/BTmkts