Business

STI shrugs off US worries to end 0.54% up

Sembcorp Marine continues to generate investors' interest, rising almost 4%

Most stocks in Singapore continued to extend the rally since the start of the year, shrugging off a looming US government shutdown as investors bet on a positive earnings season so far.

Late on Sunday, the Senate scheduled a vote on a stop-gap spending measure for noon on Monday (1am Tuesday, Singapore time), ensuring the federal government would stay shut in the morning and leaving workers uncertain how long it would last.

Analysts see minimal impact on the US economy from a short-term government shutdown but warned that a prolonged stalemate in Washington could dampen confidence in US assets.

"The markets had not expected this shutdown. Given that US share prices have rallied strongly since the beginning of the year, we have to see if this event is a trigger to change the market trend," Mr Takafumi Yamawaki, head of Japan fixed income research at J.P. Morgan Securities, told Reuters.

Mr Yamawaki noted that during previous government shutdowns - two in 1995 and one in 2013 - US bond yields have tended to slip in the first few weeks after the closure. But so far, US Treasuries yields have risen despite the shutdown, extending their uptrend since September.

Mr Poul Kristensen, portfolio manager at New York Life Investment Management, concurred: "Due to the limited economic impact, markets should be largely unaffected.

"If there is a little pullback, we believe it will be a buying opportunity. The last time the government shut down in 2013, markets moved higher."

After opening at 3,551.96, the key Straits Times Index (STI) headed north to close at 3,569.43, up 0.54 per cent or 19.07 points from Friday's close. More than 1.8 billion shares worth $1.4 billion were traded. Gainers outpaced losers 247 to 177.

Sembcorp Marine continued to generate investors' interest. The offshore marine service provider, which has risen nearly 20 per cent last week, is subject to a lot of speculation including a potential privatisation or divestment by parent Sembcorp Industries and expectations that it will not be hit by a fine like Keppel Corp with regards to its operations in Brazil.

OCBC Investment Research said should an offer for Sembcorp Marine materialise, there could still be some upside supposing the price offered is higher, which is typically the case to entice shareholders to bite.

"Assuming a 20 per cent premium from current levels, this would translate to about $2.76 a share," the research house said.

Sembcorp Marine ended at $2.39 a share, up 9 cents, or almost 4 per cent, with more than 31 million shares changing hands.

Singapore Exchange (SGX) was also actively traded, as analysts upgraded the bourse to a buy after it approved the primary listing of companies with dual-class share structures in Singapore. It is also looking to issue $1 billion to $2 billion in debt for acquisitions.

DBS Group Research said that it expects SGX's earnings to grow by 4 per cent to 11 per cent, after a relatively weak fiscal 2017. It raised its target price on SGX from $8.40 to $8.90.

"SGX's continued efforts to drive market liquidity and new product initiatives should bear fruit in the coming years."

Elsewhere, shares closed higher in Hong Kong, with the Hang Seng Index up 138.52 points, or 0.43 per cent, to 32,393.41.

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