Bulls And Bears

Singtel and local banks lead STI rebound

Risk sentiment recovers on oil prices, and commodity prices gain as well

Singapore shares rebounded yesterday as investors took heart from a rise on Wall Street and more stable oil prices.

The Straits Times Index closed 1.17 per cent or 34.06 points higher at 2,951.81, led by Singtel and the three banks. Singtel jumped 2.6 per cent or 10 cents to $3.96, with 30.9 million shares traded.

UOB KayHian noted that companies with foreign-denominated earnings should get a boost from the Singdollar weakening against the greenback. These include Singtel, as 74 per cent of its pre-tax profit comes from Australia, Indonesia, India, Thailand and the Philippines.

"In particular, the Australian dollar has strengthened 4 per cent against the Singapore dollar since March. Singtel will benefit from stronger contribution from Optus, which accounted for 25 per cent of group pre-tax profit in the third quarter," it said.

Banks were also in the black. UOB gained 1.9 per cent or 37 cents to $19.86, OCBC Bank climbed 1.2 per cent or 11 cents to $9.39, DBS Group rose 1.2 per cent or 19 cents to $15.87.

UOB KayHian has a buy call on OCBC due to its resilient asset quality and conservative management of its exposure to the oil and gas sector. It also has a buy call on DBS.

Although the STI has "slightly exceeded the upper limit of its stated range at 2,920", DBS Bank sees limited upside to local corporate earnings growth in the face of an uncertain global outlook. It said: "Still, the market's undertone remains firm."

Risk sentiment recovered as a reduction in Kuwait's oil output due to a workers' strike and expectations of the supply-demand imbalance levelling out in the second half of the year helped oil prices, Citi Research said.

Commodity prices rose as well, as concerns eased over China's slowdown and better-than-expected US corporate earnings.

Energy and commodities-related plays were among the most actively traded. Magnus Energy jumped 50 per cent or 0.1 cent to 0.3 cent with 79 million shares traded and Ezra Holdings rose nearly 2 per cent or 0.2 cent to 10.4 cents with 50.1 million shares changing hands.

Energy counter IEV Holdings climbed nearly 7 per cent or 0.6 cent to 9.2 cents, with 45.6 million shares traded while Noble Group gained 4.6 per cent or two cents to 45.5 cents, with 67.3 million shares traded.

Keppel Corp rebounded 1.2 per cent or seven cents to $6.07 despite several analysts keeping their "hold" calls on order book concerns.

"We would like to monitor the developments in Brazil and the oil market before revisiting our rating on Keppel, said DBS Bank, which has a hold call. "We are wary of potential provisions of up to $200 million for the higher-risk non-Sete Brasil projects, though management guided that it is not required at this juncture. Nevertheless, its dividend yield remains decent at 4 per cent," it said.

A version of this article appeared in the print edition of The Straits Times on April 20, 2016, with the headline 'Singtel and local banks lead STI rebound'. Subscribe