Banks put drag on market

Singapore equities' five-day rally spread over the past two weeks came to a halt yesterday after counters of market movers including the three local lenders, Singapore Telecommunications (Singtel) and Genting Singapore fell.

The benchmark Straits Times Index (STI) ended the session 31.94 points or 0.96 per cent lower at 3,293.13, after retreating from an intraday high of 3,331.13.

Trading was mixed with 3.6 billion units valued at $1.5 billion changing hands and losers beating gainers 244 to 224, or nine up for every 10 down.

The three banks lost a combined 23 points, ahead of the European Central Bank's (ECB) meeting.

UOB Bank's counter took the biggest hit and ended the day 59 cents lower at $23.66. Shares of DBS Bank and OCBC Bank fell 41 cents and 15 cents to finish at $21.45 and $11.05 respectively.

Index movers Singtel and Genting lost four cents and 2.5 cents to finish at $3.88 and $1.08 respectively.

Shares of Hutchison Port Holdings Trust lost nearly three points, ending the day at $0.61 after shedding 4.5 cents. OCBC Investment Research had placed a "sell" call on the stock with a target price of $0.42.

OCBC had said the trust's Q2 results were within expectations and the deep-water assets would offer a comparative advantage in future.

But it added that the trust is trading 14.2 per cent above the research house's projected fair value.

Rowsley continued to top the actives' list for a second day, with over 700 million units traded. The stock rose 2.3 cents to $0.164.

With earnings season kicking in, Credit Suisse said in its Asian Daily report: "Following a decent Q1 2017 reporting season that saw consensus MSCI Singapore earnings per share raised by 0.7 per cent in Q2 2017, we believe a potentially lacklustre results season could lead to a pause in the positive earnings momentum.

"For the banks, we expect Q2 2017 earnings to grow high single digit to low-teens year-on-year (overall sector 0.9 per cent quarter on quarter/10.3 per cent year-on-year).

"Loan growth is likely to remain on track for FY17 mid-single digit growth. However, the divergence of Sibor/SOR from the US rates has dampened the net interest margin (NIM) expansion prospects and could prompt bank management to review NIM guidance."

Credit Suisse added that it sees scope for potential disappointment by SATS (underperform, target price $4.65), driven by margin decline with rising cost pressures, as well as for StarHub (underperform, target price $2.20), driven by margin pressure before the entry of TPG Telecom.

BRIGHT SPOTS

"Stocks which we believe are likely to show resilient earnings are Singtel and ST Engineering.

"We also expect some green shoots in the offshore and marine sector, particularly for Sembcorp Industries," it said.

Ahead of a key Organisation of Petroleum Exporting Countries meeting next week, energy plays remained under the spotlight as oil prices held firm yesterady after gains made in the previous session when falling US crude inventories lifted the market. Counters of Magnus Energy and GSS Energy were among the most active.

Across the region, markets were mixed with Hong Kong's Hang Seng chalking up a ninth successive gain yesterday, the Nikkei also up on prospects of strong corporate profits and more certainty from the Bank of Japan, and Australia shares extending gains on upbeat banking stocks.

On the contrary, Malaysia and New Zealand share prices closed lower.

IG market strategist Jingyi Pan said in a note yesterday that it has been interesting to note the selling of the euro ahead of the ECB meeting, a clear indication that the market has been paring back some expectation of hawkishness from the ECB. 


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