Bull headedness

Close watch on oil and airlines as STI eases

Shares down despite rise in oil-related stocks, with firms in aviation leading the losers

News that oil production curbs will be enhanced to support prices was not enough to excite the local market, with shares closing down for the fifth straight session yesterday.

Members of the Organisation of Petroleum Exporting Countries are said to have agreed on extending the supply cuts by another nine months, with a couple more producers set to join the action.

The crude oil benchmark Brent futures gained further to around US$54 a barrel on the speculation, which could be confirmed at the Opec meeting on Thursday.

Local stocks seen as related to oil prices rose in response.

Sembcorp Marine added three cents or 1.75 per cent to $1.74, Keppel Corp added nine cents or 1.39 per cent to $6.56, and Sembcorp Industries closed up six cents or 1.91 per cent at $3.20.

KepCorp and Semb Industries were among the 14 blue chip gainers yesterday although the Straits Times Index still fell 3.35 points or 0.10 per cent to 3,213.57.

The $1.04 billion turnover across the entire market pointed to investors' reluctance.

There were 12 STI stocks that ended in the red, with companies in the aviation industry leading the losers. In-flight catering firm Sats pared 21 cents or 3.97 per cent to $5.08, despite the 31.4 per cent growth in fourth-quarter net profit reported last week.

OCBC analyst Eugene Chua said: "Management noted a few factors that may potentially result in lower margins over the near term such as falling yields of airlines translating to pricing pressure for Sats, and lower government subsidy of staff costs."

The long-term outlook is still one of growth, but Mr Chua maintained his hold rating for Sats on a $5.12 fair value.

Singapore Airlines was down 19 cents or 1.9 per cent to $9.79, in an ongoing slide after reporting its first quarterly loss in five years.

Meanwhile, Hong Kong's Cathay Pacific announced yesterday that it will slash 600 jobs, a reminder to investors of the challenges full-service carriers are now facing.

SIA said it will leave no stone unturned in an ongoing business review, but investors will want to hear plans for top-line growth amid its competition with budget airlines, instead of superficial cost management, KGI Securities Singapore trading strategist Nicholas Teo said.

In the banking sector, DBS Group Holdings was up 16 cents or 0.77 per cent to $20.86 and United Overseas Bank rose 11 cents or 0.47 per cent to $23.38.

Outside the STI, Moya Holdings Asia stayed hot, rising a further 0.4 cent or 3.6 per cent to 11.5 cents on 57.6 million traded shares. The Jakarta-based water-treatment firm has gained 64 per cent over the past month.

E-commerce service provider Yuuzoo Corp was also active, up 1.1 cents or 15.28 per cent to 8.3 cents on turnover of 63.8 million shares.

A version of this article appeared in the print edition of The Straits Times on May 23, 2017, with the headline 'Close watch on oil and airlines as STI eases'. Print Edition | Subscribe