Bulls And Bears

Rising US-Iran tensions lift some energy stocks

Traders expect US to pull out of Iran nuclear deal, and that oil prices will rise

The prospect of higher oil prices in the wake of rising US-Iran tensions boosted some energy shares in Singapore yesterday, but traders were still treading warily.

The mixed mood, however, did have enough optimism to allow the benchmark Straits Times Index (STI) to snap a three-day losing streak and inch up 10.31 points, or 0.29 per cent, to 3,543.17.

Losers pipped gainers 207 to 200, with 1.75 billion shares changing hands for $1.17 billion.

Phillip Securities analyst Jeremy Ng has noted that January's high of 3,611 points, which the STI breached last week, is a critical resistance area that "seems to be an obstacle for the bulls".

"Expect the STI to head into a correction next, to test the 3,500 psychological round number followed by 3,430," he said on Monday.

The key focus was on oil yesterday. Expectations among traders that the United States will pull out of the Iran nuclear disarmament deal inevitably led to the notion that oil prices will rise if international sanctions are again applied.

Offshore and marine counters that made the actives list yesterday included Mermaid Maritime, up 0.2 cent to 13.8 cents on a churn of 8.3 million shares. CSE Global closed flat at 43 cents, with 6.78 million shares traded, while Sembcorp Marine dipped one cent to $2.09.

Banks were another hot sector, after leading the index's gain last month. With all three local lenders having turned in strong earnings growth for the first quarter, analysts were generally positive on widening net interest margins (NIMs).

Banking stocks were mixed, with DBS Group Holdings adding two cents to $28.99, and United Overseas Bank up five cents to $29.34.

But OCBC Bank faltered, shedding nine cents to $13.08. Watchers did not miss the fact that its year-on-year NIM rise was the weakest among its peers, although DBS analysts said "the repricing effect from rising rates should still see NIM on an increasing trend".

UOB Kay Hian analyst Jonathan Koh stuck to an "overweight" call on the sector yesterday, with an upside risk for interest rates pegged to US Federal Reserve rate decisions. His preference was for DBS as it was "most sensitive to rising interest rates".

Meanwhile, ComfortDelGro added eight cents to $2.27. Its taxi unit has made its first fleet order since December 2016. The rival private-hire industry has run into volatility with Uber's departure, Grab's rollback of promotions and the market entry of new start-ups.

A version of this article appeared in the print edition of The Straits Times on May 09, 2018, with the headline 'Rising US-Iran tensions lift some energy stocks'. Print Edition | Subscribe