Business

STI rises above 2,900 in mixed session

Banks contribute almost half of the index's 24.9-point jump; advance-decline score at 227 to 222 as oil prices dampens sentiment

AN overnight rise on Wall Street and probable month-ending window-dressing of certain key blue chips - or "portfolio rebalancing", if you prefer - yesterday helped push the Straits Times Index (STI) up 24.88 points to 2,904.02, taking it 22 points or 0.8 per cent into the black for 2016.

Yesterday also saw the latest Morgan Stanley Capital International (MSCI) index rebalancing come into effect.

For the MSCI Singapore Index, Sats was added while Noble Group and Sembcorp Marine were deleted. However, both were then included in the MSCI Singapore Small Cap Index. Noble crashed $0.013 or 7.6 per cent to $0.159 on massive volume of 1.23 billion, and Sembcorp Marine closed with an $0.085 or 5.7 per cent loss at $1.395 on volume of 85.4 million.

A steep slide in oil prices, however, dampened sentiment somewhat, and this was reflected in an advance-decline score of 227 to 222 which suggested that the index's gains were narrowly focused and that the broader market did not follow.

A check of the index's movers showed that rises in the three banks were instrumental in sending the STI above 2016's starting level of 2,882, their combined contribution amounting to almost 12 points.

Thanks to the heightened activity in blue chips and the selling of Noble, turnover came to 2.9 billion units worth $2.6 billion, the highest daily total for the year.

Banks' outperformance has come mainly because of expectations of higher interest rates, starting with the US where a rate hike is virtually certain at this month's Federal Open Market Committee meeting. In the federal funds futures market, the probability of a rate hike is now 100 per cent.

As for Singtel, Macquarie Warrants (MW) noted that while the stock is currently outperforming the STI, its performance in 2016 has lagged that of the STI in the second half of the year.

"Note, the STI is up 2.4 per cent in the last six months, Singtel shares are down for the same percentage," said MW.

"The latter, which peaked in July 2016, had tumbled as much as 16.7 per cent, while the STI had fallen only 5.2 per cent over the same period."

MW also reported that "investors in Singapore have been accumulating Singtel call warrants since the start of the month, when the stock came under pressure and fell more than 7 per cent in three weeks due to... news about increased competition".

State Street Corporation said its global investor confidence index (ICI) fell 0.3 point to 98.9 from October's revised reading of 99.2 and that the decline in sentiment was driven by a 4.6-point decrease in the Asian ICI to 116.1 and a 2.6-point decline in the European ICI to 86.5. The North American ICI rose slightly from 95.6 to 95.7

Ms Jessica Donohue, executive vice-president and chief innovation officer, State Street Global Exchange, said in a press release that the setbacks in the ICI last month were felt most strongly by Asian-based institutional investors.

"Trump's victory has clearly exacerbated anti-globalisation jitters. Moreover, confidence in Europe further declined to the mid-eighties, a relatively low level, as the UK's exit from the European Union and Italian political risk remain a source of major concerns," said Ms Donohue.

As for oil prices, the 4 per cent plunge on Tuesday to around US$44 (S$63) per barrel came after reports indicated opposition from Iran and Iraq towards production cuts, casting doubt that an agreement could be reached at a key meeting yesterday.

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