Business

STI posts 9.18 points rise

Combined rises from the three banks added eight points to the STI; Noble best performer among top 20 most active stocks

Large rebounds in the three bank stocks and a firm day for the Dow futures yesterday helped the Straits Times Index post a 9.18 points rise to 3,257.52.

The broad market followed with 248 rises versus 186 falls, excluding warrants, but turnover was below average at 1.9 billion units worth $999.4 million.

Within the index, it was gains for DBS Bank, UOB and OCBC Bank that stood out, their combined rises adding eight points to the STI.

Also firm were shares of Jardine Cycle & Carriage, Singapore Exchange and Singapore Telecommunications.

No specific reasons could be found for the rebound, other than short covering ahead of an expected rise on Wall Street, possibly in anticipation of a dovish statement by the United States Federal Reserve after its latest Federal Open Market Committee meeting ends tomorrow.

Over in the United Kingdom, the political cloud that has hung over the country since last week's general election remains in place as incumbent Prime Minister Theresa May struggles to form a majority coalition.

Of the top 20 most active stocks, the best performer was Noble Group, which jumped $0.030 or 10.2 per cent to $0.325 on volume of 26.7 million.

Other actives included Spackman and Golden-Agri Resources.

In other news, Singapore's retail sales value (seasonally adjusted) increased 1.6 per cent in April over the previous month and 2.6 per cent on a year-ago basis. Excluding motor vehicles, sales rose at an even faster rate of 4.4 per cent month on month and 4.9 per cent year on year - the strongest showing in over two years.

SURPRISE

Bank of America Merrill Lynch said this strong showing came as a surprise, given muted expectations for retail sales excluding motor vehicles.

"Retail sales, and more broadly private consumption, has been stuck in the doldrums amid the softening labour market and weak consumer confidence," it said.

"At this stage, given little has changed fundamentally in terms of the drivers of consumer demand, we believe that the April data may have been just a 'flash in the pan', rather than being sustainable."

OCBC Investment Research said although the retail data could point to improving consumer sentiment, "the magnitude of growth for retail sales is not significant", bearing in mind that high operating costs remain a challenge for retailers.

"Considering the expansion by e-commerce players as well, we are neutral on the sector...", said the broker.

Bank of Singapore chief investment officer Johan Jooste, in his Theme Update for 2H 2017, said the "Trump trade" is over.

"The actual policy outcomes of the Trump presidency cannot be predicted in full - the man is just too temperamental for that - but we can make a good guess that mostly, it will fail to live up to the promises he made for bold changes," said Mr Jooste.

"Infrastructure spending will likely prove to be the biggest disappointment to his support base.

"He has been slow to move on proposals, and it has become clear that the path to much higher infrastructure spending will be a tortuous one."

Morgan Stanley in its Global Strategy Mid-Year Outlook Climbing The Last Wall Of Worry said it expects broad-based growth, contained inflation, still relatively easy policy and low volatility to drive more aggression among investors and corporates.

"While 2018 looks far more challenging, we'd remain constructively positioned for now," it said, adding that "equities are supported by strong earnings growth and rising animal spirits'' and that emerging markets are supported by improving macro fundamentals and still-reasonable valuations.

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