Banks and oil and gas plays roared back to new multi-month highs after a surprise Opec deal to slash output sent oil prices soaring above US$52 a barrel levels.
Hopes that the worst may be behind the severely hit oil and gas sector sent Keppel Corp shares jumping 8.1 per cent, or 44 cents, to $5.89, and OCBC climbing nearly 1 per cent, or nine cents, to $9.17 - both nine-month highs.
DBS Group gained 1.8 per cent, or 31 cents, to $17.86, United Overseas Bank rose 1.2 per cent, or 25 cents, to $20.66 - both at levels not seen since November last year.
Bank stocks are on a tear as expectations of a December interest rate hike firm up. Hopes that oil prices are finally stabilising, which would keep banks' non-performing loans from oil and gas companies from worsening, also helped, analysts say.
According to a Moody's report on Nov 28, the Government's plans to provide aid in the form of bridging loans and the like to embattled local oil service companies are "credit positive" for DBS, UOB and OCBC. It said the move could help "contain the significant deterioration in the credit quality of the loans".
The three Singapore banks' exposure to oil service companies was about 1 to 3 per cent of their gross loans at the end of September.
Although the measures could increase the banks' credit exposure to the beleaguered sector, the Government will take on 70 per cent of the loan risk, leaving participating banks the remaining 30 per cent, the report said.
Among the 15 most indebted offshore services companies, over 40 per cent of their debt becomes due in the next 12 months. So far, the banks have supported affected borrowers by rescheduling loan repayment terms and lowering loan amortisation amounts to match the borrowers' tighter cash flows, Moody's said.
The Government's aid could now provide an additional source of cash flow for eligible borrowers, particularly those with significant near-term refinancing needs. The Government estimates the measures will generate about $1.6 billion of new loans in a year, the report said.
Meanwhile, OCBC Investment research has a neutral call on the oil and gas sector, given the still "dim outlook and depressed valuations".
If oil prices make a sustained recovery, exploration and production companies stand to benefit first as these are "more direct proxies of the oil price. The drillers and vessel charterers and service providers could be next in line. The yards, that depend on new order flows, could take a longer time to see earnings recover, as their clients have to regain confidence in the market before issuing new orders", OCBC said.
Sembcorp Industries, which jumped 7 per cent, or 19 cents, to $2.89, got a "preferred pick" from OCBC, given its "more diversified business operations and undervaluation of its utilities segment".
Maybank Kim Eng has a buy call on Ezion Holdings, which gained 5.9 per cent, or two cents, to 36 cents, saying it may be an "early beneficiary in the oil cycle, after oil producers.
"Its third-quarter results hinted at the possibility of cancellation of future projects that are no longer viable. While we do not rule out write-offs, we believe the market has mostly priced these in," the broker said.
