Bulls And Bears

STI bucks trend as regional cheer fades

Index up 0.65% with lenders leading way; investors cautious on US-China trade talks

The cheery mood among many regional investors lasted only a day, with Monday's gains mostly wiped out yesterday, although local shares bucked the trend.

Nervy investors remained cautious as they held out for a breakthrough in trade talks between the United States and China, but the sentiment here was a bit lighter.

The Straits Times Index rose 20.14 points, or 0.65 per cent, to 3,122.94, with gainers beating losers 207 to 170, on turnover of 1.3 billion shares worth $880.4 million.

Local lenders did the heavy lifting: DBS was up 0.67 per cent to $23.91; OCBC Bank put on 1.14 per cent to $11.50; and United Overseas Bank advanced 0.88 per cent to $25.17.

Other index heavyweights also chipped in, with conglomerate Jardine Cycle & Carriage ahead 1.09 per cent to $36.09, while retailer Dairy Farm International Holdings was 2.33 per cent higher at US$9.22.

Trade remains the hot topic among investors everywhere. The Trump administration has expressed optimism that it can reach a "reasonable" deal with China.

That could involve the Chinese buying more US soya beans and liquefied natural gas, while agreeing to deeper "structural reforms" on contentious issues such as intellectual property rights and market access.

But Nomura Securities strategist Masanari Takada is wary, telling Reuters: "Many investors are still trying to play it safe and it is yet to be seen whether the recovery continues or ends up as a short-term relief rally."

There is plenty of caution around technology stocks, too, with analysts concerned about profit warnings in the upcoming fourth-quarter earnings season.

Just last week, tech giant Apple lowered its profit guidance for the first time in more than a decade.

Maybank Kim Eng analyst Lai Gene Lih said: "We are lowering target prices across Singapore technology coverage to factor in cuts to our earnings forecasts amid heightened macro-uncertainty."

Tech and semiconductor counters fell yesterday. AEM Holdings lost 1.14 per cent to 87 cents, UMS Holdings declined 1.68 per cent to 58.5 cents, and Excelpoint dipped 0.85 per cent, also to 58.5 cents.

Mr Lai remains neutral on the tech sector and prefers firms with stronger resilience to the trade war and other uncertainties, such as Venture Corp (target price $17.48) and Valuetronics (90 cents).

Venture declined 1.18 per cent to $14.27 yesterday, while Valuetronics closed unchanged at 69 cents.

Mr Lai noted that Venture might even benefit from the trade war because of its South-east Asian-centric production footprint.

A version of this article appeared in the print edition of The Straits Times on January 09, 2019, with the headline 'STI bucks trend as regional cheer fades'. Print Edition | Subscribe