BullsAndBears

Asian markets rally in wake of oil deal

Agreement by crude producers to cut output sees STI close up for eighth straight session

Singapore joined the rest of Asia in a region-wide rally yesterday following overnight news that major crude producers have agreed to cut output.

The expectations that supply and demand in the oil market will finally rebalance and lift prices meant energy-related shares had an unsurprisingly robust showing, with banks also enjoying a strong session.

The benchmark Straits Times Index, already in a rally sparked by the Wall Street Trump trade, closed up for the eighth straight session, gaining 23.41 points or 0.81 per cent to 2,928.58. Trading was lively with 1.8 billion shares worth $1.63 billion changing hands across the bourse.

The buoyant mood was also evident elsewhere. Tokyo was the outperformer, up 1.12 per cent, while Sydney put on 1.1 per cent. Shanghai rose 0.72 per cent and Hong Kong gained 0.39 per cent.

The momentum is a welcome change for the local market after a stagnant few months, but there's no guarantee on how things will pan out from here, noted KGI Securities Singapore trading strategist Nicholas Teo. "For instance, there's US payroll to watch out for tomorrow, and then there's the US (Federal Reserve) meeting down the line. Any of these can potentially block the run," he said.

"In longer terms, we have to beware of what some analysts call the 'sugar rush'. The markets are getting excited over all these events - Trump, oil production cut - that haven't actually happened, and things may turn challenging for the market afterwards."

Regardless, investors gladly seized the day, and 14 of the 30 STI component stocks ended in the black.

Keppel Corp led the gainers, surging 44 cents or 8.07 per cent to $5.89, with 24.5 million shares traded. Sembcorp Industries added 19 cents or 7.04 per cent to $2.89, on 17.7 million shares traded.

Outside the STI, Ezion Holdings put on two cents or 5.88 per cent to 36 cents, Nam Cheong closed up 0.6 cent or 9.68 per cent to 6.8 cents and Ezra Holdings rose 0.2 cent or 4.76 per cent to 4.4 cents.

In the banking sector, DBS was up 31 cents or 1.77 per cent to $17.86, OCBC added nine cents or 0.99 per cent to $9.17 and United Overseas Bank advanced 25 cents or 1.22 per cent to $20.66.

"The banking sector has been under pressure for a while now due to their asset quality exposure to the oil and gas sector, and any relief on this front will benefit the banks," Credit Suisse Asia Pacific equity investment strategist Suresh Tantia said.

Meanwhile, 12 STI counters ended lower. Hongkong Land Holdings dropped 15 US cents or 2.34 per cent to US$6.26. Singapore Airlines was down 19 cents or 1.9 per cent to $9.81. Genting Singapore eased one cent or 1.03 per cent to 96 cents. The gaming counter was up 28 per cent over the past month and may see some profit-taking in the coming sessions.

A version of this article appeared in the print edition of The Straits Times on December 02, 2016, with the headline 'Asian markets rally in wake of oil deal'. Print Edition | Subscribe