Bulls And Bears

S'pore shares fail to join Asian rally

Banks send STI down 0.2% on concerns over narrowing net interest margins

Local shares yesterday failed to join the regional rally sparked by Wall Street's surge after a United States-China interim trade deal was confirmed last Friday.

Equity markets were also lifted by better-than-expected Chinese factory and retail sales data, suggesting the trade outlook has improved alongside the continued strength of the Chinese consumer.

Markets in China, Hong Kong, Japan, Malaysia, South Korea and Taiwan were higher. Taiwan's Taiex Index put in the best showing of the lot, advancing 1.3 per cent to 12,097.01 - the first time since 1990 that it has closed above 12,000.

But Singapore's blue-chip index was mainly bogged down by the performance of the banking trio and closed at 3,200.80, a 5.29-point or 0.2 per cent dip. The STI spent most of the session struggling for direction before whipsawing in the final hour, much like it did on Monday.

The bank decline inflicted some damage: UOB lost 0.7 per cent to $26.24, DBS dipped 0.2 per cent to $25.66 and OCBC edged down 0.2 per cent to $10.89.

While there are concerns that the lenders may face narrowing net interest margins (NIMs) on the back of accommodative monetary policies globally, Maybank Kim Eng analyst Thilan Wickramasinghe noted that NIM could surprise on the upside as the US Federal Reserve is unlikely to adjust interest rates next year.

He added that he remains positive on Singapore banks, noting that they offer the highest defensive dividend yields in South-east Asia.

Maybank's top pick is UOB because of the conservative management of its balance sheet. The brokerage sees DBS as a shorter-term play as it could dish out higher dividends since its Common Equity Tier 1 levels exceed regulatory and management safety requirements.

A remisier said that OCBC is trading below its historical price-to-book and is also cheaper in that measure compared with its local rivals.

Among second-line equities, Sunpower Group faced profit-taking, closing 1.6 per cent lower at 60 cents after hitting a 52-week high of 61 cents on Monday. KGI Securities head of Singapore research Joel Ng said Sunpower stands to benefit from its Green Investments business, poised to thrive next year.

DBS Group Research initiated coverage on Sunpower on Monday with a "buy" call and price target of 81 cents.

Trading volumes here stood at 1.16 billion shares worth $1.08 billion with losers pipping gainers 198 to 194. Half of the benchmark's 30 counters ended in the red.

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A version of this article appeared in the print edition of The Straits Times on December 18, 2019, with the headline S'pore shares fail to join Asian rally. Subscribe