Firmer oil, play on banks push STI up

ANOTHER firm session for the Straits Times Index (STI), thanks to a rise in oil prices and a push on the banks, another relatively mixed session for the rest of the market - that in a nutshell was the story of yesterday's session on the local stock market.

The STI ended 23.41 points higher at 2,928.58 for its eighth consecutive rise. Of this, about 13 points came from gains in the three banks. Keppel Corp, a beneficiary of higher oil, jumped $0.44 or 8.1 per cent to $5.89 on volume of 24.5 million and contributed a further seven points. However, excluding warrants, there were still 203 falls versus 248 rises, so the index's strength was not widely reflected in the rest of the market.

Turnover was a healthy 2.3 billion units worth $1.67 billion, though this was almost $1 billion or 35 per cent less than Wednesday's $2.6 billion.

Traders woke up to news that oil had jumped almost 10 per cent overnight to just below US$50 per barrel after a key Opec meeting ended with some agreement on production cuts, the first in eight years.

The FTSE ST Oil and Gas Index rose 7.3 per cent in response. Sembcorp Marine, which on Wednesday plunged $0.085 to $1.395 because it had been dropped from an MSCI Index, rebounded $0.075 to $1.47 with 41 million shares done, while Ezion, Ezra, KrisEnergy, Nam Cheong and Vallianz all ended higher in active trading.

While Ezra managed a $0.002 rise to $0.044 with 59.8 million shares traded, DBS Vickers (DBSV) said in a report on Wednesday it is maintaining its "fully valued" call on the stock as it thinks Ezra's balance sheet risks remain high with no operational turnaround in sight. DBSV's sum-of-parts target price for the counter was $0.036.

As for banks, Macquarie Warrants (MW) said in its daily newsletter gains for the sector this week have come because the Government last Friday announced one-off support for the oil and gas sector in the form of bridging loans.

"Singapore banks have a combined $50.3 billion exposure due to loans provided to the oil and gas sector and hence clearly welcomed the latest announcement by the Ministry of Trade and Industry," said MW.

Among other index stocks which have been in play over the past fortnight is casino operator Genting Singapore, after it reported better-than-expected earnings and withdrew from a joint venture in Korea. Traders are now waiting for the outcome of parliamentary deliberations in Japan regarding legalisation of casinos as Genting is hoping to gain a licence.

"Given the relatively muted response of Genting Singapore's (GS) price to the deliberations (in Japan on Wednesday) as well as a high degree of investor awareness of the LDP's majority in parliament, the legalisation of casinos in Japan may already be priced into the market," said OCBC Research.

"From a fair value standpoint and to minimise the dependence of our assumptions on unpredictable political outcomes, we intend to wait for more certainty and clarity on Japan's prospects before revisiting our target price ... Risk-averse investors are encouraged to take profit at current prices; according to Bloomberg, GS is currently trading at a consensus blended forward EV/EBITDA of 11.7x, which is a 37 per cent premium to its two-year average of 8.6 and a 17 per cent premium to its five-year average of 10."

Genting's shares slipped $0.01 to $0.96 with 18.3 million traded.

Elsewhere, shares of Noble Group, which took a hammering on Wednesday when the stock was dropped from an MSCI index, rebounded $0.004 to $0.163 on volume of 562.3 million.

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