Singapore shares rise 0.54% on strong earnings, Fed inflation outlook

An SGX sign is pictured at Singapore Stock Exchange.
An SGX sign is pictured at Singapore Stock Exchange.PHOTO: REUTERS

SINGAPORE - Local shares were lifted on Thursday (July 27) by a swell that has swept across Asia, fuelled by strong corporate earnings.

The local benchmark Straits Times Index gained 17.99 points, or 0.54 per cent, to close at 3,354.71, while Asian shares as a whole, measured by the MSCI Asia Pacific Index, rose to the highest level since December 2007.

Hong Kong-based CCB Securities executive director Nelson Yan told Bloomberg that the United States Federal Reserve's recent statement that inflation in the world's largest economy remains below its target of 2 per cent is also helping to boost sentiment in the market.

That is because low inflation will likely mean the Fed will raise interest rates at a slower pace in order to encourage more bank lending, which in turn would spur economic activity.

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"Investors are cheering a slower pace at which the Fed may unwind its balance sheet," Mr Yan said. "The rally will likely continue into the fourth quarter as long as inflation stays mild."

Tokyo stocks gained 0.2 per cent, Shanghai rose 0.1 per cent, Seoul added 0.3 per cent and Hong Kong increased 0.7 per cent.

Noble Group was among the most active stocks at home, falling 18 cents to 39.5 cents. The commodities trader said on Wednesday that it anticipates a net loss of US$1.7 billion to US$1.8 billion (S$2.3 billion to S$2.45 billion) for the three months to June 30, after posting a net loss of US$129.5 million for the first quarter of this year.

It also said it was planning to sell its global oil liquids business and had reached a deal for its North American gas and power subsidiary.

OCBC Bank gained 24 cents to $11.49, after reporting before the market opened on Thursday morning that it had made a net profit of $1.08 billion for the second quarter, an increase of 22 per cent from the same period a year ago.

The news lifted the other banking stocks, with DBS Group rising 36 cents to $22.25 and United Overseas Bank gaining 32 cents to $24.60.

Viva Industrial Trust added a cent to 93 cents, after saying on Wednesday (Jul 26) that second-quarter net property income rose 17.5 per cent from a year ago to $20.2 million.

OCBC Investment Research analyst Deborah Ong said in a report that the solid results were within expectations, but noted that the trust's price levels have exceeded her fair value estimate.

She downgraded Viva from "buy" to "hold", with a target price of 89.5 cents.