Slow start to the week for STI

The Straits Times Index kicked off the week by drifting to a 4.87 points loss at 3,214.55 in low volume of 1.8 billion units worth $669.4 million.

The broad market was also soft, recording 213 rises versus 222 falls, excluding warrants.

The closure of Wall Street for Memorial Day, which falls on the last Monday of May, was said to be a key reason for the lethargy in Singapore.

Banks had a mixed outing - DBS and OCBC inched higher, but UOB ended marginally in the red.

Among the conglomerates, Sembcorp Industries (SCI) finished $0.03 higher at $3.18 on volume of 925,500. Phillip Capital in a report yesterday said it has initiated coverage of SCI with an "accumulate" recommendation and $3.50 target price.

Three reasons were given - a turnaround in India, stable growth in China and a strategic review that could remove a conglomerate discount that Phillip said the market typically applies to such companies.

The broker's target price for SCI was reached using a sum-of-the-parts valuation and a 10 per cent conglomerate discount.

Among the actives were AddValue Technologies which slipped $0.004 to $0.061 on volume of 95 million and YuuZoo, which ended $0.004 weaker at $0.083 with 28.5 million traded.

Noble Group's shares, which have suffered a battering in recent weeks because of various financial concerns, ended $0.01 down at $0.41 on turnover of 11.7 million.

The day's most active company-issued warrant was Chasen Holding's, which ended unchanged at $0.078 on volume of 1.2 million.

The day's most active structured warrant was issued by Macquarie Bank on the Hang Seng Index with a June 29 expiry and strike price of 26,200.

It closed unchanged at $0.049 with 163,730 traded. Over in Hong Kong, the Hang Seng Index rose 62.36 to 25,701.63.

POSITIVE

Maybank Kim Eng in its latest property sector update said it has turned positive on developers as it expects catalysts from a potential rebound in property prices.

"Strong home-buying interest could drive a sharp decline in unsold stock and allow developers to raise prices. Hence, we believe home prices can pick up without further easing," said the broker.

"We raise our commercial property valuations after lowering cap-rate assumptions to better reflect their realisable value in the market.

"We raise target prices by 12 per cent and upgrade City Developments and Ho Bee to 'buys'. UOL remains our top pick."

GAIN

The Singapore Exchange's investor education portal My Gateway reported that the three SGX-listed real estate investment trusts that are exclusively invested in mainland China property, namely CapitaLand Retail China Trust, EC World Reit and BHG Retail Reit have averaged a 13 per cent total return in 2017, in line with the 13 per cent gain posted by SGX's S-Reit 20 Index.

On the likelihood of an interest rate hike next month, Bank of America-Merrill Lynch (BOA-ML) said that while it thinks the data does not justify rates being raised, it is changing its call to match the consensus.

"The Fed appears to be motivated by easy financial conditions and a desire to advance the normalisation process," said BOA-ML in its May 26 US Economic Weekly "The Fed doth protest too little".

"What comes next? The most likely path is for the Fed to deliver another hike in September and announce a change to the reinvestment policy in December. That said, the risk is skewed towards an earlier adjustment to the balance sheet."

The federal funds futures market is currently pricing in a 100 per cent probability of the Fed raising interest rates at its June 14 meeting.

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