STI tracks Dow futures, finishes weaker

The Straits Times Index (STI) spent most of Thursday tracking movements in the Dow futures first and Hong Kong second, finishing the day a net 5.88 points weaker at 3,342.92, mainly due to weakness in the three banks.

Turnover amounted to 2.1 billion units worth $1.2 billion and excluding warrants, there were 206 rises versus 243 falls throughout.

The Dow Jones Industrial Average on Wednesday closed above 22,000 for the first time ever but this failed to stir much response here - not surprisingly, given that the STI had already risen on Wednesday in anticipation of a firm session for US stocks that day.

"The Dow's record was mainly because of Apple's earnings and wasn't that broad-based," remarked a dealer here. "This narrowness could be a concern for some investors." At 5pm, the Dow futures were down 15 points.

Among the index stocks in play was that of casino operator Genting Singapore, after it reported its second quarter figures - a net profit attributable to ordinary shareholders of $143.3 million compared with a loss of $10.5 million last year. The counter rose $0.015 to $1.195 with 60.2 million traded.

Nomura in its "buy" on Genting raised its target price from $1.38 to $1.42. Among the reasons given were that the latest figures point to the sustainability of higher margins and that the consensus has not yet factored in the earnings boost of $118 million that will materialise in the fourth quarter when the company redeems its perpetual bonds.

OCBC Investment Research said it continues to have a positive view of Genting's initiatives to boost operating margins and keep receivable impairments low.

"These efforts, coupled with growing gaming revenues against a backdrop of increasing visitor arrivals, are expected to be the main driving force behind the strong Ebitda (earnings before interest, tax, depreciation and amortisation) growth we project for the rest of the year. After adjustments, our FCFE-based (free cash flow estimated) fair value increases from $1.17 to $1.32," said the broker.

Maybank Kim Eng, in the meantime, maintained its "buy" on Genting and lifted its target from $1.25 to $1.35.

In the technology sector, shares of Venture Corp ended $0.05 down at $13.78 with 1.5 million traded. The company's shares had shot up $0.62 on Wednesday, drawing a query from the Singapore Exchange. It has replied that it does not know of reasons for that jump.

In discussing the weakening US dollar and the US stock market, Rabobank, in its "When the unconventional becomes the convention" report, noted that though the weaker dollar has helped companies exporting goods abroad, the uptick in earnings is unlikely to filter through to the economy immediately, if in any significant manner at all.

"...The question remains whether these same firms will invest, expand and hire on the domestic front," said the bank.

"This is the recipe that the Fed is seeking in its desire to see a sustained boost to economic growth and thus provide a sustainable upward boost to inflation. This mix continues to elude the Fed...."

Natixis Asset Management's chief market strategist David Lafferty, in his July Capital Market Notes' "The Big Short", said stretched valuations in virtually all major asset classes, albeit with a synchronised, gradual improvement in economic activity, lead to the recommendation that "investors should seek to participate in risk assets (improving fundamentals) without sticking their necks out too far (as valuations don't warrant it)".

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