A robust showing by Wall Street on Friday on growing expectations that the US Federal Reserve is not likely to raise interest rates next month sent Singapore shares rallying 2.68 per cent yesterday.
The Straits Times Index soared 67.95 points to close at 2,607.90, powered by Singtel and the banking counters.
"With the exception of a financial crisis, the Singapore market has priced in plentiful risk and, in our opinion, including that of a possible technical recession," DBS Vickers Securities said in a report yesterday. "Our base-case view remains for an inflexion point around the 2,500 level, with rebound potential to 2,750."
Singtel jumped 4.5 per cent or 16 cents to $3.74, with 51.6 million shares traded. OCBC Investment Research maintained a buy call on the telco, citing its defensive business and relatively attractive yield of nearly 5 per cent.
"Singtel's third-quarter results were within our expectations," OCBC analyst Carey Wong said. "While we may see near-term challenges due to softening consumer and business sentiments, we believe that Singtel's push into cyber security and big data analytics could make the telco more resilient to these business downturns."
DBS Group Holdings gained nearly 3 per cent or 39 cents to $13.41, OCBC rose 2.4 per cent or 18 cents to $7.64 and United Overseas Bank climbed 1.7 per cent or 29 cents to $17.85. Investors will be eyeing the release of the 2015 full-year results of UOB today, OCBC tomorrow and DBS next Monday.
"We are watching for the banks' quantum of loans earmarked as non-performing loans," remisier Alvin Yong said.
DBS Vickers noted that if the "excitement of the net interest margins (NIMs) spike for the Singapore banks cools off now that the Fed may slow down the pace of rate hike, there leaves hardly any drivers for growth in 2016".
"Judging from the trends we have seen in 2015, we believe that even with the Fed rate hikes, there is not much room for NIM to rise significantly. With loan growth likely to stay in the low single digits, top-line growth will be slower. Non-interest income is unlikely to excite and may be volatile depending on markets, and be the wild card to earnings," it said.
"As we exit the benign credit cycle, credit costs will start to accelerate. We forecast 2016 earnings growth of 6 per cent. Upside surprise could come from higher-than-expected NIM increase."
Meanwhile, Technics Oil and Gas was among the most actively traded counters, plunging nearly 81 per cent or 50.1 cents to 11.9 cents with 41.3 million shares traded.
The stock, suspended since Jan 6 to give it more time to "negotiate a proposed major disposal", resumed trading yesterday after saying no definitive agreements had been reached.