SINGAPORE - Three new firms that entered the Straits Times Index (STI) on Monday (Sept 21) have so far today bucked the market's downtrend to notch gains.
The shares of the three new entrants UOL Group, Sats, Yangzijiang Shipbuilding Holdings are up as at 12.45 pm. UOL rose 0.5 per cent to $6.05, Sats advanced 1.32 per cent to $3.85, while Yangzijiang climbed 1.29 per cent to $1.18.
They outperformed the STI which was down 0.57 per cent at 2,863.44.
The fact that the new counters are three of only eight STI stocks that have recorded gains so far on Monday suggests that their listing could be responsible for these gains, said Phillip Futures analyst Howie Lee.
IG market strategist Bernard Aw said, however, that the increases in the share prices of Sats and Yangzijiang may not be due entirely to the listing. Sats' price had been increasing all year before the index changes were announced, he pointed out. The price of Yangzijiang could also have increased because of a technical rebound following its share price falling between May and August this year.
UOL Group is a property investor while Sats Ltd is Changi Airport's biggest passenger, baggage, cargo and aircraft handling firm. Yangzijiang is a shipbuilding and offshore engineering company.
The three stocks which dropped out of the index were two giant Hong Kong-based conglomerates - Jardine Matheson (JMH) and Jardine Strategic (JSH) - as well as commodities firm Olam International.
There could be increased buying and selling of the stocks involved in the index changes this week as portfolio managers who track the index readjust their holdings, says Mr Aw.
The index changes could also increase the traded volume in STI stocks, he added.
The incoming stocks are collectively cheaper than the outgoing ones. JMH shares cost around $46 apiece and JSH costs about $27 as at noon today. The traded volumes of these two stocks have also always been low. The three incoming stocks on the other hand each cost below $7, Mr Aw said.
JMH and JSH, however, are not likely to see substantial falls in traded volumes and prices because of this change, says Mr Aw. Jardine's corporate earnings remain robust and diversified, and this would support the prices of these shares. Also, the traded volumes of these shares have already been low, and thus do not have room to fall much further, said Mr Aw.
The traded volumes of Olam shares are unlikely to be adversely impacted by the change either, said analysts. The firm remains one of the top three local commodity firms, meaning investors who seek exposure to commodities would likely pick up Olam stocks. Moreover, traded volumes had already been low, Mr Aw said.
Olam's share valuation could be impacted by its recent merger and acquisition deal with Mitsubishi and the commodity sector outlook, Mr Aw said.