BullsAndBears

Geopolitics, rising US bond weigh on STI

10-year US govt bond yield hitting 3.1% cited as reason for stocks losing appeal

Local shares appear to be going nowhere for now, seemingly stuck between North Korea's machinations and rising United States treasury yields.

The yield on US 10-year Treasury notes touched 3.07 per cent yesterday, the highest since 2011 and the sort of level that experts say could make equities appear less attractive.

Investors also had to contend with political uncertainty surrounding North Korea after Pyongyang signalled that leader Kim Jong Un might pull out of the summit with US President Donald Trump set for Singapore next month.

"Uncertainty over geopolitical meetings and agreements weighed down on the index," said CMC Markets trader Oriano Lizza. "The region is hyper sensitive leading into trade talks between China and the US, and supposed US-North Korea nuclear talks."

The Hang Seng drifted 0.54 per cent lower while the Kospi in Seoul dropped 0.46 per cent but the Nikkei in Japan bucked the trend, bouncing off morning lows to end 0.53 per cent up as the yen weakened.

Manufacturing data confirmed Japan's shrinking economy. Local traders did not draw any inspiration from the April non-oil domestic exports (Nodx), which rose 11.8 per cent year on year, reversing the revised 3.2 per cent contraction in March.

April's increase was supported by the strong expansion in the non-electronic exports segment which offset a fall in electronics exports.

Electronics Nodx fell 6.9 per cent in April from the same month a year earlier - the fifth consecutive month of decline.

"The very strong year-on-year growth rates in exports for most of 2017 may not be sustained as we move towards the second-half of 2018," said UOB economist Francis Tan. He expects Nodx to expand at a slower pace of 6.5 per cent this year, compared with 8.8 per cent in 2017.

The end result left the benchmark Straits Times Index (STI) up 3.71 points, or 0.11 per cent, at 3,536.76. About 1.47 billion shares worth $1 billion changed hands, with 174 gainers to 225 losers.

SingTel reported a 19 per cent fall in its fourth-quarter net profit yesterday, hurt by lower contributions from its regional associates in Indonesia and India as well as adverse currency movements.

DBS Group Research has kept its "buy" call, with its target price unchanged at $3.85. The stock closed up two cents at $3.44 yesterday.

A version of this article appeared in the print edition of The Straits Times on May 18, 2018, with the headline 'Geopolitics, rising US bond weigh on STI'. Print Edition | Subscribe