Business

STI slides in tandem with 1.5% loss in HK

Losers outnumber winners 248-163 in the broad market, with volume weak at 1.5b units worth $893m

The closure of Wall Street for July 4 holiday meant that the Singapore market yesterday had to rely on Hong Kong for direction.

As a result, with the Hang Seng Index sliding 1.5 per cent, its largest one-day fall in 2017, the STI finished a largely forgettable session nursing a 12.29-point loss at 3,211.17.

The broad market recorded 163 rises versus 248 falls excluding warrants and volume done was a weak 1.5 billion units worth $893 million.

No specific reason could be found for the selling in HK other than the fact that the index had risen sharply in the first half of the year, gaining 17 per cent between January and May.

In the shipbuilding sector, YZJ dropped $0.005 to $1.215 on volume of 12 million shares.

The company said on Monday it has concluded six orders in the second quarter with a total contract value of US$133 million (S$184 million). YZJ said that year-to-date, it has secured a total of 19 effective shipbuilding contracts with an aggregate value of US$450 million.

Nomura said: "First half orders account for only 42 per cent of our full-year forecast, lower than the historical average contribution of 58 per cent since FY10.

"There is downside risk to our orders forecast of US$1.07 billion for FY17F.

"We reiterate our 'reduce' rating. We don't think orders recovery, if any, in FY17-18F, would be strong enough to turn the backlog and the earnings back to growth.

"We find the orders results in H1 disappointing and the valuation very expensive at more than two standard deviations above its historical mean." Nomura's target price for YZJ is $1.04."

Among the top actives was printed circuit board and semiconductor firm Jadason Enterprises, its shares rose $0.01 or 11 per cent to $0.10 on volume of 93.2 million.

CIMB Research, in a June 30 report, initiated coverage of the company with an "add" recommendation and a $0.17 target price, saying it thinks Jadason is heading for a strong earnings recovery over 2017-18.

"Key factors aiding a turnaround were right-sizing its workforce, improving productivity, higher use of automation and a large $12.9 million impairment on production equipment in FY2015," it said.

Mr Ian Heslop, manager of the Old Mutual North American Equity Fund in a report on US equities, said as the US celebrates Independence Day, investors can be delighted with the long-term performance of its stock market. Over the past 10 years, the S&P 500 has returned 100 per cent.

"The question is often asked whether, given their prolonged success, US equities have now become overvalued," wrote Mr Heslop.

"US equities are certainly on relatively high valuation ratios. The price-book ratio of the S&P 500 has risen steadily over recent years and is currently 3.1 versus 2.4 for MSCI World."

Bank of Singapore's chief economist Richard Jerram, in his July 4 "Slowdown, not Downturn" report, said that recent data supports his theme of "as good as it gets".

"Developed markets are experiencing some moderate loss of economic momentum but without facing serious risk of recession...," said Mr Jerram.

"Perhaps a greater concern for financial markets is the economic recovery is sufficiently robust that a range of central banks are preparing to start to reverse the extreme monetary policy settings of recent years."

The Singapore Exchange's (SGX's) investor education portal My Gateway reported that there was a total of $51 million worth of shares bought back in June, the highest in nine months.

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