Banks nudge STI up in mixed session

Trading in the local stock market got off to a quiet start this week, with gains in the banks pushing the Straits Times Index (STI) up 8.05 points to 3,267.62.

However, the session was more mixed than the index might suggest, as sentiment was dampened by weakness in the Dow futures and a soft opening across Europe.

Excluding warrants, there were 199 rises versus 201 falls; and perhaps more importantly, turnover was a low 1.3 billion units worth $799 million.

Rises in the three banks added almost nine points to the STI on a day when investors and traders were said to be digesting the speeches made by central bankers at last week's meeting in Jackson Hole, Wyoming.

IG said the two highlights from the meeting left a vacuum for those anticipating insight into near-term policy directions and noted that reactions had been drastically different.

"Fed chair (Janet) Yellen's lack of discussion on both interest rates and the balance sheet had been perceived as retaining a dovish outlook, sending the US dollar plummeting," said IG.

"This had been further aggravated by European Central Bank president Mario Draghi's avoidance in divulging any monetary policy outlook."

CMC Markets noted the lack of guidance by both Ms Yellen and Mr Draghi, and said the focus has shifted to the ECB meeting on Sept 9 for more hints of the exit plan to end the ECB's bond-purchasing programme.

The day's most active stock was Rowsley, which slipped $0.001 to $0.117 on volume of 71.7 million.

Also active was Heatec Jietong which jumped $0.022 or 37 per cent to $0.082 on volume of 33.3 million, drawing a query from the Singapore Exchange (SGX). The company provides piping and heat exchanger services for the marine and oil & gas industries.

Also among the top actives was BlackGold Natural Resources (BNR), which ended $0.003 higher at $0.121 on turnover of 28.2 million. Phillip Securities Research in its Monday Singapore Coal Sector report noted that coal producers listed here are expected to grow their production by 60 per cent this year, much faster than their peers in Indonesia where growth is estimated at 8 per cent.

"We initiate BNR with a trading buy and target price of $0.16. At $0.16, BNR will be trading at 10x FY18 estimated earnings. This will be in line with regional peers," said Phillip.

On the impact of Hurricane Harvey which is battering the US, S&P Global Platts said that oil markets are assessing the impact on the flow of crude and refined products into and out of the Gulf of Mexico.

"The region's gasoline market is currently underpinned by strong fundamentals with gasoline cracks and the front-month time spread likely to rally due to tightening supplies, accentuated by the onslaught of the hurricane," said S&P Global Platts.

On the US Federal Reserve's decision to start reducing its balance sheet, observers noted that this will remove a source of market liquidity and push up bond yields, leading to tighter financial conditions.

However, Schroders' chief economist Keith Wade said in his August Talking Point that markets are in uncharted territory.

"Periods where the Fed announced changes to its quantitative easing programme have been associated with market volatility," said Mr Wade.

"The Fed has not said where it sees the balance sheet ending up; it will be somewhere below today and above its pre-financial crisis level."

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