US relief rally helps perk up STI
Subdued activity in local stocks not unexpected as Monday's low volume indicated a lack of interest in the market
Activity in local stocks remained subdued yesterday as traders appeared relatively unexcited by Wall Street's all-time Monday high.
The Straits Times Index (STI) traded within a narrow band before ending 7.18 points higher at 3,235.69. Turnover was low at 1.3 billion units worth $993 million.
Excluding warrants, there were 215 rises versus 190 falls.
The US market's Monday rally was attributed to relief - that Hurricane Irma petered out without doing as much damage as feared and that North Korea celebrated its founder's day without further missile or nuclear tests.
Although the STI's response was disappointing, it was not wholly unexpected as the index had already on Monday failed to respond positively to a large rise in the Dow futures.
CMC Markets in its daily commentary noted that Monday's volume had been low, which indicated a lack of interest in the local market.
"The Straits Times Index has entered into technical consolidation after it hit a recent high of 3,354 points in mid-August, with its immediate support and resistance levels at 3,200 and 3,272 respectively," it said.
Other market observers had similar assessments - the common thread being that for now, Singapore stocks are not in favour, possibly because it has already run up strongly this year.
Banks have been the driving force this year on hopes that rising interest rates will benefit their bottom lines.
However, of late, upside momentum in the sector has flagged. Yesterday, they had a mixed session with DBS Bank and OCBC Bank rising but United Overseas Bank falling.
RHB in its banks round-up noted that last week, both UOB and HSBC launched three-year fixed-rate home loan packages, joining DBS which already has a package in place.
"We see this as a response to recent market expectations of delays in the hiking of Fed funds rate (FFR)," said the broker.
"This should translate to a delayed increase in Sibor (Singapore interbank offered rate).
"As such, we believe the NIM (net interest margins) widening theme for Singapore banks may be pushed back as well.
"As DBS stands to gain the most from hikes in FFR, a delay would be negative for DBS."
In the food and beverage sector, shares of Sheng Siong Group (SSG) ended $0.025 higher at $0.945 on volume of 4.3 million. Nomura said that it is maintaining its "buy" on the supermarket operator but has reduced its target price from $1.07 to $1.06 after cutting its earnings estimates by 2-6 per cent for the next two years.
"The cuts in EPS (earnings per share) are largely due to us lowering our assumptions for space for new stores by 4,000 sq ft to 10,000 sq ft through FY17/19E, mitigated by better-than-expected retail sales sentiment," said Nomura, adding that SSG currently trades at 20x FY18E price-earnings, in line with its historical mean.
In the real estate investment trust (Reit) sector, Cache Logistics Trust ended $0.005 lower at $0.82 on volume of four million. The trust recently proposed a rights issue mainly to reduce debt.
Phillip Securities Research said this could be a pre-emptive move by Cache, either before its aggregate leverage exceeds the statutory limit of 45 per cent, or that the manager is already considering a pipeline of properties for acquisition.
It maintained its "neutral" recommendation with target price lowered from $0.86 to $0.82.
As for Wall Street, the Bespoke Group was quoted in US newspaper Barron's on Monday as saying that with the S&P 500 closing at a new all-time high that day, it has now been 3,108 calendar days since the last 20 per cent decline (the standard bull/bear market distinction).
"The current bull is the second longest behind the 4,494 days that passed between December 1987 and March 2000 without a 20 per cent pull-back," it said.
This article appears in The Business Times today. For full listings of SGX prices, go to btd.sg/BTmkts