BULLS AND BEARS

ST Index hovers near 3,300 support level

Slower rate hikes bad for bank stocks but good for Reits: Analysts

LOCAL shares drifted lower yesterday as worries over a continued deadlock between Greece and its creditors outweighed dovish cues from the United States Federal Reserve.

The benchmark Straits Times Index again flirted with the key 3,300 support level, falling 0.77 per cent or 25.49 points to close at 3,300.42.

Financials led the bourse lower, with DBS down 0.96 per cent or 20 cents at $20.58, while OCBC fell nearly 1 per cent or 10 cents to $10.03.

UOB was a tad more resilient, ending 0.04 per cent or one cent higher at $23 on news that it intends to strengthen its yuan capabilities.

Analysts say banking counters are under pressure because the prospect of slower interest rate hikes could hamper improvement in net interest margins.

Magnus Energy Group, the most actively traded stock yesterday, was queried by the Singapore Exchange about its "unusual volume movements" after its price skyrocketed 71 per cent or 2.5 cents to six cents, with 96.2 million shares traded.

Noble Group was also heavily traded. It sank 4.9 per cent or 3.5 cents to 68 cents as skittish investors bailed out despite the company's fourth share buyback on Wednesday. About 40.5 million shares were traded.

The commodities trader, which said it bought 39.7 million shares at 71.38 cents apiece, has now purchased 102.7 million shares, or 15.2 per cent of the maximum of 673.9 million shares it is authorised to buy.

But upside has been capped by concerns over the firm's transparency and a decision on Wednesday by Goldman Sachs to class the firm's credit rating as "one notch above junk status".

Another hot stock, Ezion Holdings, jumped 3.4 per cent or 3.5 cents to $1.055 with 36.9 million shares traded.

Remisier Vincent Khoo cited a "combination of shortcovering and relief that a lawsuit against Ezion was withdrawn".

Meanwhile, real estate investment trusts (Reits) may get some reprieve as the latest signals from the Federal Reserve indicate that the pace of increase in interest rates would be more gradual than expected.

Fed officials see slightly lower rates at the end of next year and 2017 than forecast in March, and more policymakers are now in favour of raising rates only once or not at all this year.

"This may relieve the pressure on Reit prices, given that the distribution per unit is estimated to be at 1 per cent to 3 per cent for every 50-basis point jump in interest rates," IG market strategist Bernard Aw said.

gleong@sph.com.sg

A version of this article appeared in the print edition of The Straits Times on June 19, 2015, with the headline 'ST Index hovers near 3,300 support level'. Print Edition | Subscribe