Business

STI rises 1% as Wall St avoids collapse

Also playing a part is early window-dressing or buying in anticipation of window-dressing on Friday

Wall Street avoided a major blowout on Monday, thus resulting in a minor relief rally in this part of the world yesterday.

Also possibly playing a part in helping the Straits Times Index rebound 30.94 points or 1 per cent to 3,157.82 yesterday was the impending arrival of the end of the first quarter of 2017 on Friday, a time when blue chips can be expected to be "window-dressed" or padded.

If so, then part of yesterday's rise could either be attributed to early window-dressing or buying in anticipation of window-dressing on Friday.

Turnover amounted to a moderate 2.7 billion units worth S$1.3 billion and, excluding warrants, there were 321 rises versus 152 falls across the market.

The STI dropped 16 points on Monday after news over the weekend of an embarrassing failure by the Trump administration to push through with its health reform plans, a failure that has cast doubt on whether it can gain approval for its budget.

Wall Street had been banking on the budget sailing through with little resistance, so the healthcare debacle led to concerns that investors had been overly optimistic and complacent.

The fact that the US market avoided a total whitewash on Monday suggests that many in the market are still hoping that President Donald Trump would be able to deliver his promised "phenomenal" tax plan.

Here, the index's rebound was led by several familiar, large-cap names such as the three banks, Jardine stocks and Singtel.

In the land transport sector, shares of ComfortDelGro rose S$0.07 to S$2.56 with 19.3 million traded.

In a March 27 "buy" call, OCBC Investment Research said that the authorities' recent green light for a flat fee structure for taxi companies (ie no surcharges) would level the playing field between taxi operators and private hire car service providers.

It also expects ComfortDelGro to increase its dividend yield over time as the company receives cash from the sale of bus assets to the Land Transport Authority.

OCBC set an unchanged fair value of S$2.95 for the company.

QUERY

In the second line, shares of Asia Fashion surged S$0.085 or 27 per cent to S$0.395 during the day, drawing a query from the Singapore Exchange (SGX).

The company halted trading and replied in the negative before lifting the halt.

The stock ended at S$0.39 for a net gain of S$0.08 on turnover of 374,600.

In its daily notes, Rabobank said that having failed at the first hurdle with healthcare, Mr Trump is now under significant pressure to implement his promised tax reforms.

"Though the market may have stabilised following (Monday's) sell-off, investor's sensitivity to Trump's political reality (versus campaign trail promises) will no doubt begin to intensify," the bank said.

"Though the market managed to find its footing, investors may not remain steady handed unless actual details in regard to the tax cuts and a clear willingness on the part of legislators to push through such growth-boosting measures emerge."

For the local economy, RHB said in a report, "Singapore - Key Beneficiary of External Recovery", that despite continuing structural challenges, it projects Singapore's real gross domestic product to grow 2.2 per cent in 2017, from 2 per cent last year, because of a continued upturn in global demand, which would support the manufacturing and logistics industries, the nation's two key engines of growth; improving productivity gains, primarily in the manufacturing sector; and stabilising domestic demand, aided by a low-base effect and supportive government measures.

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