Business

STI rebounds after three days of losses

Market quiet ahead of Trump inauguration but local banks, Singtel and Jardine group rise

A quiet session yesterday ended with the Straits Times Index (STI) rebounding from three days of losses, rising eight points to 3,008.22. The broad market recorded 224 rises versus 194 falls amid turnover of 1.9 billion units worth $963 million.

Investors are said to be waiting for the inauguration of Mr Donald Trump as the next US president to be completed today (tomorrow, Singapore time) and to see what his economic initiatives might be before making any moves.

As his first working day is on Monday, expectations are that markets will remain range-bound for the time being.

All three local banks rose, while gains in Singtel and the Jardine group also contributed towards the STI's positive showing. The Dow futures, however, traded marginally in the red.

In the property sector, shares of CapitaLand rose $0.06 to $3.18 on volume of 26 million.

The company had earlier this week announced it had sold all 45 unsold units in its upmarket condominium The Nassim for $411 million.

CapitaLand said assuming that the sale was effected on Jan 1, 2016, then based on its unaudited figures for the nine months ended Sept 30, 2016, its earnings per share would have increased from $0.179 to $0.217.

OCBC Investment Research yesterday maintained a "buy" on CapitaLand with unchanged fair value of $3.68, referring to the latter's purchase of a prime site in Vietnam's central business district, and saying it likes that CapitaLand continues to diversify geographically, especially in one of South-east Asia's fastest-growing economies.

Elsewhere, ST Engineering's shares ended $0.02 lower at $3.39 on volume of 2.9 million.

There is a big jump in the percentage of investors expecting corporate earnings to rise... Bank of America Merrill Lynch

The company earlier in the week said its aerospace arm ST Aerospace had secured new contracts worth about $840 million in the fourth quarter of last year for services ranging from line and airframe maintenance to component repair and overhaul.

In response, Credit Suisse in a Jan 18 report maintained an "outperform" on the stock, saying it expects strong new orders to provide a boost to earnings and this will drive consensus upgrades and a re-rating.

"In addition, STE offers an attractive dividend yield of 4.7 per cent in 2017E," it said.

STABLE PRICES

US Federal Reserve chair Janet Yellen said in a speech to the Commonwealth Club on Wednesday that the US economy is close to the central bank's objectives of full employment and stable prices.

According to observers, her speech provided some hints on the road ahead for the Fed, which last month hiked interest rates for the second time in a year.

In the federal funds futures market, the implied probability of a rate hike at the Feb 1 policy meeting is now 14.5 per cent, up slightly from 12 per cent at the start of the month.

Bank of America Merrill Lynch (BOAML), in its January Fund Manager Survey, reported that investor expectations of global growth have improved to two-year highs while global inflation expectations remain elevated, with the fifth highest reading on record.

"There is a big jump in the percentage of investors expecting corporate earnings to rise 10 per cent or more in the next 12 months... the most bullish reading since June 2014, however, cash levels rose to 5.1 per cent from 4.8 per cent in December, well above the 10-year average of 4.5 per cent," said BOAML.

"The three most commonly cited tail risks are trade war/protectionism, US policy error and China FX devaluation; in January, investors said they were buying eurozone, tech, equities and Reits, while selling industrials, emerging market equities and commodities."

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