Bank stocks' gains push April total market cap up 2.6%

CGS-CIMB Research's Ms Lim Siew Khee said the earnings announced so far suggest that banks are an overweight sector, supported by net interest margin expansion and positive overall business sentiment.
CGS-CIMB Research's Ms Lim Siew Khee said the earnings announced so far suggest that banks are an overweight sector, supported by net interest margin expansion and positive overall business sentiment.PHOTOS: LIM YAOHUI, ST FILE, BLOOMBERG
CGS-CIMB Research's Ms Lim Siew Khee said the earnings announced so far suggest that banks are an overweight sector, supported by net interest margin expansion and positive overall business sentiment.
CGS-CIMB Research's Ms Lim Siew Khee said the earnings announced so far suggest that banks are an overweight sector, supported by net interest margin expansion and positive overall business sentiment.PHOTOS: LIM YAOHUI, ST FILE, BLOOMBERG
CGS-CIMB Research's Ms Lim Siew Khee said the earnings announced so far suggest that banks are an overweight sector, supported by net interest margin expansion and positive overall business sentiment.
CGS-CIMB Research's Ms Lim Siew Khee said the earnings announced so far suggest that banks are an overweight sector, supported by net interest margin expansion and positive overall business sentiment.PHOTOS: LIM YAOHUI, ST FILE, BLOOMBERG

But losers outstrip gainers 325 to 245, as Venture sheds most value

Big gains in bank stocks pushed the total market value of listed firms higher last month as trade war fears subsided.

Total market capitalisation of the 738 companies on the Singapore Exchange expanded 2.6 per cent from March 31 to $1.01 trillion as at April 30, its first rise after two straight months of decline.

April's market cap was up 4.8 per cent on the same month last year.

There was a similar rise for stocks on the benchmark Straits Times Index, with the value increasing 4.3 per cent from March to $601.4 billion last month.

Still, losers outnumbered gainers 325 to 245 last month, with technology firm Venture Corporation shedding the most in market value after its earnings missed estimates.

The group posted 72.2 per cent growth in net profit to $83.7 million for the three months to March 31, compared with the same period last year. Analysts had hoped that earnings would hit $91 million in the first quarter.

The biggest gainers last month were DBS, UOB and OCBC Bank, which all capitalised on a range of favourable factors in the financial sphere. These included a re-rating of Asian banks, a better earnings outlook, higher interest rates and better margins, and their growing wealth businesses, said Ms Carmen Lee, head of OCBC Investment Research.

Revenue rose 1.5 per cent to $856 million. In US dollar terms, revenue for the first quarter would have grown by 9.1 per cent, Venture said.

Hi-P International, a components supplier for Apple and Amazon, also slid in value.

April's other top 10 losers included ST Engineering, City Developments Limited (CDL), Sembcorp Marine, Olam International and Best World.

Some of these, such as CDL, Venture and Hi-P, have fallen after a strong rally last year, noted Ms Carmen Lee, head of OCBC Investment Research.

The brokerage has a "buy" call on CDL, ST Engineering and Venture.

"In the short to medium term, there is still uncertainty in the market, especially in view of the trade tensions," she said.

"For longer-term investors, price corrections are opportune times to slowly accumulate these stocks."

The biggest gainers last month were DBS, UOB and OCBC Bank, which all capitalised on a range of favourable factors in the financial sphere.

These included a re-rating of Asian banks, a better earnings outlook, higher interest rates and better margins, and their growing wealth businesses, said Ms Lee.

At the same time, "the high allowances of the last two to three years seemed to have reached a trough, too", she noted.

The DBS results released on Monday beat market expectations and fuelled an uptick in bank stocks.

UOB announces its results tomorrow, with OCBC following next Monday.

CGS-CIMB Research's head of Singapore research Lim Siew Khee said the earnings announced so far suggest that "it is quite obvious that banks are an 'overweight', supported by net interest margin expansion and generally positive overall business sentiment".

The brokerage's preferred banking stock is DBS.

The mood around the technology sector is more sombre.

Although earnings growth is positive, investors are spooked by the prospect of this tapering off while single-customer risk is prevalent as well, said Ms Lee, who advises investors to stick to big names like Venture.

In the capital goods sector, earnings for Keppel Corporation and Sembcorp Marine, and potentially Sembcorp Industries, have not been good, but the oil price is high enough to sustain investor interest, she added.

A version of this article appeared in the print edition of The Straits Times on May 02, 2018, with the headline 'Bank stocks' gains push April total market cap up 2.6%'. Print Edition | Subscribe