Business

STI stumbles along with weak Wall Street

Drop of 11.33 points due largely to Jardine Matheson's 2.6% retreat; traders alert for any sign of window-dressing

After having risen 58 points on Tuesday and Wednesday to reach a 19-month high, the Straits Times Index fell back 11.33 points to 3,173.24 yesterday, most probably in response to a weak Wednesday for Wall Street.

Turnover came to 3.2 billion units worth $1.2 billion for an average value of $0.37 per unit. Excluding warrants, there were 233 rises versus 230 falls throughout.

On Wednesday, Hongkong Land was the largest index mover; yesterday it was another Jardine stock that was the biggest influence - Jardine Matheson's US$1.71 or 2.6 per cent drop to US$64.40 on volume of 353,200 cut about six points off the STI.

Traders today will be alert to any last-minute "window-dressing" opportunities since it is the last day of the first quarter. However, there is also a chance that this may have already been completed over the past few days.

In the property sector, shares of CapitaLand dropped $0.05 to $3.63 on volume of 13 million, making it the index's second-largest loser.

BALANCED RESULTS

OCBC Investment Research maintained a "buy" on CapitaLand, saying it likes that the company continues to deliver balanced results in an uncertain environment due to its diversified asset portfolio and robust recurring income streams.

"After the recent set of property curb reversals in Singapore and healthy data-points for home sales in key markets China and Vietnam, we update our model with firmer assumptions, and our fair value estimate increases from $3.68 to $3.93," said the broker.

In the second line, shares of China Everbright Water (CEW) ended unchanged at $0.475 on volume of 596,700.

RHB issued a "buy" with $0.54 target after CEW earlier this week announced it has entered into a new PPP (public-private partnership) project in Suizhou, which includes an industrial waste water treatment plant.

"Assuming the construction of the project commences in 2H17, we estimate this PPP project to account for approximately 9ppts of our FY17F EPS growth," said RHB.

"Coupled with the construction earnings from its Zhenjiang Sponge City project, we are positive on the Group's earnings outlook for the year."

Bank of Singapore in its March 30 Investment Strategy report said that French election tail risk is receding and its base case is for presidential hopeful Marine Le Pen to lose in the second round of elections on May 7.

"For the French election, unless the situation changes dramatically over the next few weeks, the hurdle appears very high for Le Pen to win. In fact, she seems to be slipping recently, rather than making headway," said investment strategist James Cheo.

HEALTHCARE REFORMS

"If Le Pen loses, the risk of a European break-up will be reduced dramatically, but more importantly the economic outcome can be quite favourable."

On the failure of the Trump administration to push through its healthcare reforms, DBS chief investment officer Lim Say Boon in his March 27 Investment Insights said that there are two ways of looking at the failure.

"On one hand, the optimist will say that since the administration has failed on the healthcare front, pushing through taxation cuts and infrastructure spending will now be of paramount importance (hence translating to a higher probability of success)," said Mr Lim.

"On the other hand, this may not be the case. The healthcare bill is widely seen as a test of party discipline among the Republicans and clearly, it has fallen short.

"The strong rally in risk assets was premised on the assumption that the Trump administration will soon unleash substantial fiscal stimulus and financial deregulation to boost the US economy.

"But, so far, this has not exactly been the case."

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