Business

Subdued market due to Wall Street closure, Budget

STI ends 10.96 points lower at 3,096.69, largely through losses in Jardine Matheson and banks

With Wall Street closed on Monday for President's Day and with traders waiting to hear details of the Singapore Budget, the fine-tuned machine that is the local stock market drifted for most of the session in relatively subdued trading.

The Straits Times Index (STI) slipped into the red for almost the entire session and finished 10.96 points weaker at 3,096.69, largely through losses in Jardine Matheson and the three banks.

Turnover amounted to 2.6 billion units worth $1.05 billion compared with last week's $1.4 billion daily average. Excluding warrants, there were 196 rises versus 274 falls. Hong Kong closed higher and Europe opened in the black.

The unit value traded was $0.41 and of the 20 most actively traded stocks, 17 were priced below $0.50.

Among the actives was oil and gas stock Ezion Holdings, which over the weekend issued a profit warning. The company said it will have to take an impairment of its assets that will lead to a loss for Q4 2016 and the full year.

In response, CIMB said this is not a surprise and thinks that the value of the impairments could be in the region of US$45 million to US$50 million.

"It is also a non-cash item and as such, the exercise, subject to quantum booked, could clean up Ezion's balance sheet and remove any overhang doubts on the stock," the bank said.

It maintained its "add" recommendation for Ezion and the target price of $0.44 until results are announced on Feb 23, but it expects a negative reaction to last week's announcement given that this would be the first time Ezion is reporting a full-year net loss, albeit at non-core level.

Ezion ended $0.03 or almost 8 per cent lower at $0.35 with 57.6 million shares traded. The news also created spillover selling on other stocks in the sector with several others finishing weaker.

The improvements in confidence indices were underway before the US election.ABN Amro’s chief economist Han de Jong

ABN Amro's chief economist Han de Jong in his Feb 17 Macro Weekly said many commentators are focusing on US President Donald Trump as the cause of the upturn in business confidence.

"He may be part of the equation, but I think focusing on Trump alone is completely missing the point. The improvements in confidence indices were underway before the US election," said Mr de Jong.

"I think what is happening is the reversal of what happened between mid-2014 and mid-2016. During that period, a number of factors held economic growth back. Some of them were related, but mainly it was a coincidence of factors.

"These included short-term movements in China's business cycle caused by policy interventions, the collapse of investment in the oil sector due to the decline of oil prices from mid-2014, the inventory cycle, the deleveraging process and continued austerity in many countries. In my opinion, all or most of these negatives are turning at the same time."

Bank of Singapore's chief investment officer Johan Jooste, in his Feb 20 What happened to volatility?, noted that the VIX Index that measures expected future volatility has sunk to a very low reading of around 12 per cent.

"There are technical reasons driving a decline in volatility: as traders and investors become more relaxed about market risk, the demand for hedging wanes. This in turn reduces volatility measures, because (expected) volatility is a major driver in the cost of hedging," said Mr Jooste.

"However, it can also be a broader signal of complacency in the market. If so, investors who are even mildly sceptical of the Trump rally could start to look for a cheap way to hedge themselves against future turbulence," he said.

stock marketSingapore