Bulls And Bears

STI ends higher despite rout of tech counters

Earnings for local tech industry have likely peaked, says analyst

Tech stocks took a beating yesterday, but that failed to stop the local market from closing higher.

The Straits Times Index ended 12.70 points, or 0.38 per cent, up at 3,319.85, but that still leaves it down 2.44 per cent this year. Losers edged out gainers 209 to 178 on turnover of 1.21 billion shares worth $1.48 billion.

The day's main talking point was the rout of local tech stocks, which suffered a spillover effect from a torrid earnings season for American tech shares. The FTSE ST Technology index closed in the red, down 0.5 per cent or 1.23 points, and is 8 per cent lower this year.

Local tech stocks, including AEM, Hi-P, UMS and Creative, all fell.

AEM recorded the largest percentage decline, plunging 16.39 per cent to end the day at 99.5 cents.

The semiconductor equipment maker announced on Monday a 15.6 per cent rise in net profit to $9.5 million for the second quarter on the back of a 16.5 per cent increase in revenue to $72.7 million.

ASTI Holdings fell 3.57 per cent to 8.1 cents while Hi-P, an industrial mould manufacturing company, slid 6.67 per cent to $1.26.

CIMB Research analyst William Tng noted that earnings for the local tech industry have "likely peaked", adding: "Share prices will probably remain weak till the end of the year."

He noted that the long-term outlook remains positive, but the sector is unlikely to see short-term gains.

The volatility in the industry can be attributed to investors adjusting their growth expectations from several factors, including the impact of trade tensions, central banks raising interest rates and some less impressive results, said Mr Johnson Loh, an analyst at Credit Suisse.

"We remain selectively positive in the longer-term growth opportunities in technology space. However, given the relatively high expectations, we have recommended investors to adopt a more diversified approach," he added.

"Given the relatively low market depth, technology stocks in Singapore have also shown the tendency to move in tandem during US/global short-term shocks/developments."

Meanwhile, OCBC announced an initiative to equip more than 330 retail banking wealth advisers with private banking skills. The stock gained five cents to $11.57.

Elsewhere, Hong Kong's Hang Seng ended lower, dragged down by tech stocks. The sector ended 3.22 per cent lower, with index stalwart Tencent shedding 3.3 per cent.

Tokyo's Nikkei ended flat after the Bank of Japan reassured investors that it would keep its super-easy monetary policies in place for an extended period, against expectations that it would scale back its stimulus programme.

A version of this article appeared in the print edition of The Straits Times on August 01, 2018, with the headline 'STI ends higher despite rout of tech counters'. Print Edition | Subscribe