STI dips as traders turn to China banks

Despite a jump in the Dow futures, the Straits Times Index (STI) was weak throughout yesterday's session.

It is most likely because traders switched out of Singapore banks and into China bank shares trading in Hong Kong, or H-shares as they are known, following news that the People's Bank of China (PBOC) has cut its reserve ratio requirements for banks that provide loans to small businesses.

This possibility arose because falls in the three banks here were largely responsible for the STI's 16.02-point loss to 3,246.08 and because of the Hang Seng Index's 618.91-point or 2.3 per cent jump to 28,173.21.

About 285 points or almost half of that came from rises in China Construction Bank, Industrial and Commercial Bank of China, and Bank of China.

China Construction Bank, in particular, jumped HK$0.38 or 5.9 per cent to HK$6.86, adding 130 points to the Hang Seng.

In Singapore, turnover amounted to two billion units worth $1 billion, of which $171 million came from trading of DBS, UOB and OCBC. Excluding warrants, there were 208 rises versus 231 falls.

Rabobank said the PBOC's move was surprising as it does not seem to fit with the broader aim of reining in leverage, but it does fit the idea that the authorities may want to consolidate the recent yuan decline to keep growth at a decent level.

In the local property sector, shares of Oxley Holdings ended $0.015 higher at $0.575 on volume of 4.6 million. UOB-Kay Hian said in a Tuesday "buy" note that the company is a key beneficiary of the property market upcycle here because it has the largest residential landbank among Singapore-listed property players.

"Its diversified earnings base with $2.46 billion in secured sales provides earnings visibility... We re-initiated coverage with a target price of S$0.67, pegged at a 20 per cent discount to RNAV (revalued net asset value)."

"... Prospects for each tax proposal are still uncertain and there are potentially offsetting impacts..."Goldman Sachs Asset Management on US President Donald Trump's tax reform plan

In the healthcare sector, shares of TalkMed added $0.01 at $0.615 with 94,600 traded. RHB maintained a "buy" recommendation (see below).

On US President Donald Trump's tax proposals, Bank of Singapore's chief investment office Johan Jooste in his Oct 3 Weekly Strategy Update said although details are sparse, initial analysis suggests it will expand the US's budget deficit, push interest rates higher and not make much difference to the average American taxpayer.

Goldman Sachs Asset Management said it thinks the Trump tax reform plan could "marginally benefit domestically-oriented sectors and companies with high capital expenditure and low interest expenses, though prospects for each tax proposal are still uncertain and there are potentially offsetting impacts across the corporate credit spectrum". The Singapore Exchange's (SGX) investor education portal My Gateway yesterday said 23 companies bought back shares last month for $33.9 million, down from the $59.7 million in August buybacks.

"The five stocks with the largest buyback consideration value last month were OCBC, ST Engineering, Yanlord Land Group, Singapore Post and S i2i which made up more than four-fifths of the S$33.9 million," said My Gateway.

It also said total buybacks for the year so far are $321 million, compared with $752 million for the same period last year.

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