Bulls And Bears

Property, banking stocks push STI higher

Reits also fare well as local market defies gloom surrounding US-China trade talks

The modest outcome of the US-China trade talks had the expected impact on many regional markets yesterday, but local shares defied the gloom to end higher.

The Straits Times Index (STI) rose 0.81 per cent or 25.44 points to 3,183.51, with gainers thumping decliners 229 to 146 on turnover of 1.3 billion shares worth $1.11 billion.

Property and banking stocks did much of the heavy lifting. Developers CapitaLand added 2.51 per cent to $3.27 while City Developments put on 1.64 per cent to $8.70.

On the banking front, DBS gained 0.83 per cent to $24.44 and United Overseas Bank rose almost 1 per cent to $25.80, but OCBC was the exception, reversing the morning's gains to close unchanged at $11.61.

The banks have trended in the black over the past month and analysts expect them to maintain their showing against a backdrop of slower global growth this year.

CGS-CIMB analysts Andrea Choong and Lim Siew Khee are remaining overweight on the sector "on account of comfortable capitalisation and further upside of net interest margins". OCBC remains their top pick, "due to continued net interest margin upside alongside attractive valuations".

CGS-CIMB said OCBC trades at 1.1 times its current year market-to-book ratio, below the long-term mean of 1.4 times.

Real estate investment trusts (Reits) also fared well yesterday, with most counters heading north following the release of minutes from the latest United States Federal Reserve meeting. These suggested that interest rates could be placed on hold until there is more clarity on the global growth risks that could affect the economy.

Sabana Reit gained 2.5 per cent to 41 cents while ESR Reit was up 0.94 per cent to 53.5 cents. Ascott Reit also rose, up 0.91 per cent to $1.11, partly on news that it sold Ascott Raffles Place Singapore for $353.3 million to private investor Cheong Sim Lam.

Otherwise, there was not much new to cheer about as investors took stock of the US-China trade talks.

DBS Group Research analysts said that while the meeting was a first step towards easing tensions, there are challenges ahead.

"US demands for verification and enforceable targets on intellectual property rights, transfer of technologies and non-tariff barriers may not be that easily addressed," the DBS analysts wrote.

"This sets up room for volatility in the lead-up to the March 1 deadline when negotiations on these issues need to be concluded."

A version of this article appeared in the print edition of The Straits Times on January 11, 2019, with the headline 'Property, banking stocks push STI higher'. Print Edition | Subscribe