Business

STI softens in line with HK, Dow futures

Banks put drag on local index; YuuZoo and Noble Group actively traded

After Wednesday's 38-point jump, the Straits Times Index (STI) yesterday sank to a 22.37-point or 0.7 per cent loss at 3,226.34, in line with weakness in Hong Kong and the Dow futures.

Penny stocks, however, fared better with the broad market managing 200 rises versus 222 falls, excluding warrants.

Wall Street on Wednesday closed largely flat after release of the minutes of the latest US Federal Reserve meeting, which showed that a third interest rate hike this year remains likely.

This could have been a factor behind the softness here that saw volume of 2.1 billion units worth $1.1 billion traded.

The average value per unit traded was $0.52.

Banks provided the main drag, led by DBS'$0.36 drop to $20.74 which came with 3.2 million shares traded and cut almost eight points off the index.

Among the actives was social media firm YuuZoo, which ended $0.006 or 7.2 per cent weaker at $0.077 on volume of 42 million. The company's governance and accounting practices have been questioned in two articles written by a corporate governance expert and published this week in The Business Times.

For June, the STI pretty much traded in a range-bound manner as the 3,280 resistance area capped prices. Phillip Capital

The day's most active stock was Noble Group, which shot up $0.17 or 36 per cent to $0.64 on volume of 123.7 million, prompting a query from the Singapore Exchange.

The most active company warrant was that issued by property and ladies' apparel firm Second Chance that expires on Jan 23, 2020. The counter ended $0.001 down at $0.007 with 3,800 traded, while the underlying shares slipped $0.005 to $0.255 with 217,800 done.

Elsewhere in the second line, shares of agri-food company Japfa ended unchanged at $0.665 on volume of 8.9 million. DBS Vickers (DBSV) in a July 4 "buy" said it is bullish on the outlook for the Indonesian poultry market.

"We believe the drops in share price year-to-date due to fear of oversupply in Indonesia, Vietnam's swine market crash and weak performance based on 1Q17 results are not justified," said DBSV. Its target for Japfa is $0.88.

As for the Fed's minutes, it appears that there was some disappointment that no mention was made of when the central bank will carry out its balance sheet reduction.

In its Morning Update, IG said the market reacted with "dismay" and that expectations remain that rate hikes and reduction commencement will be at either of those meetings that are accompanied by Fed projections, namely in September and December.

"The series of Fed speakers lined up in the month ahead, including Fed chair (Janet) Yellen's testimony to Congress, could mark increased volatility... with the market expected to read into every word for clues on the Fed's plans," said IG's Jingyi Pan.

Rabobank said reading between the lines, "the latest Fed minutes showed that the current status quo is unsustainable but all future paths it can take are fraught with pitfalls: in short, there are no good options ahead".

Phillip Capital in its July report said it remains "neutral" on the local market with an unchanged STI target of 3,270.

"For June, the STI pretty much traded in a range-bound manner as the 3,280 resistance area capped prices," said Phillip.

"From a technical perspective, we are seeing a greater correction happening... once the 3,189 range low gets broken to the downside. In the meantime, the STI should continue to trade within the range until the resolution happens."

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