Penny stocks lead in regional rebound

Buoyant oil prices and a regional rebound fuelled a surprise rally for the Singapore stock market yesterday, with penny stocks leading the charge.

For today's market, the release of minutes from the US Federal Reserve's June meeting are expected to set the tone.

The Straits Times Index (STI) gained 1.17 per cent or 37.54 points to close at 3,248.71. Gainers outnumbered losers 301 to 150.

After regional markets took a beating on Tuesday following North Korea's test of an intercontinental ballistic missile, analysts were expecting a subdued start yesterday. Perhaps the market over-compensated on its morning coffee.

IG market strategist Pan Jingyi, who had written in a pre-opening note that jitters could keep Asian markets to a "near neutral start", said there may have been a pullback from Tuesday's knee-jerk overselling and supportive technicals.

"What we are seeing with the STI is that it has been in a consolidation range the last one to two months, and when it got near to the 3,200 support, investors saw that as an entry point," she said.

CMC market analyst Margaret Yang reckoned that Singapore may have benefited from regional strength. The Hang Seng Index in Hong Kong, for instance, rose 0.5 per cent or 132.96 points to close at 25,521.97. Oil also lubricated the reversal.

"Crude oil advanced for eight consecutive sessions, which helped underpin oil and gas and offshore names such as Sembcorp Marine, Keppel Corp and Sembcorp Industries. Small caps were extremely active today too," she said.

BLUE CHIPS

They were active indeed. The blue chips were mostly positive, with Singapore Telecommunications gaining 0.3 per cent or one cent to head out at $3.90.

The three banks also rose in tandem, with DBS Group Holdings adding 2 per cent or 41 cents to $21.10, while United Overseas Bank rallied 2 per cent or 45 cents to $23.35. OCBC Bank closed at $10.83, higher by 2.1 per cent or 22 cents.

But the penny stocks were the ones in leisure suits.

Total traded volume yesterday was 2.6 billion shares, which was about 9 per cent above the average daily volume for the first five months of the year.

Turnover, however, was $1.1 billion, which was about 94 per cent of the January-to-May daily average.

Those numbers reflected what one trader described as "rotational penny plays".

Jiutian Chemical Group jumped 23.5 per cent or 0.4 cent to 2.1 cent to lead the volume table.

Nobody really knew why there was movement in the chemical manufacturer, whose last announcement was in April.

"Don't have any specific explanation on Jiutian, except very small market, and hence easy to ramp up," one trader said.

The market is now looking to the US central bank for hints on how it might wind down its balance sheet after years of quantitative easing (QE).

"The shrinking plan will have a long-term impact to market liquidity and could potentially cause mortgage rate to rise," said CMC's Ms Yang.

"This is similar to the scenario back to 2014, when central banks started to plan for QE tapering, which triggered significant volatility in stock and forex market."

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