STI ends losing streak, rebounds by 4.3%

Rally comes as Wall Street finishes higher on govt measures to cushion US economy

Local shares shot up to end their losing streak yesterday as a bit more optimism lifted investor sentiment. The Straits Times Index (STI) gained 99.74 points, or 4.3 per cent, to close at 2,410.74, but it still closed the week down, slipping 223.26 points, or 8.5 per cent.

The market opened up 1 per cent in the morning and built on those gains throughout the day.

Its rally came as Wall Street finished its session higher - after a series of unprecedented blockbuster government and central bank measures were announced in a bid to cushion the impact of Covid-19 on the United States economy.

Among those are a trillion-dollar stimulus plan on top of Federal Reserve interest rate cuts.

"Fiscal stimulus has been geared to shore up liquidity conditions in financial markets and for corporates," said Mr Stephen Innes, chief markets strategist at AxiCorp.

While it is generating a positive effect on the markets, Mr Innes warned that this may be the calm before the storm as the "nasty impact on corporate solvency will become more evident in the weeks ahead when the demand shock filters through to the real economy".

Having said that, the STI is enjoying the much-needed reprieve, with gainers outpacing losers 376 to 142, and 2.02 billion shares worth $2.51 billion changing hands.

Genting Singapore was among the most actively traded stocks and one of the biggest gainers, rising 13.7 per cent to 58 cents.

DBS analyst Jason Sum noted yesterday that the stock's "valuation is simply too cheap to ignore". This is despite DBS slashing its estimates for Genting's earnings before interest, taxes, depreciation and amortisation by another 26 per cent for this year and 6 per cent for next year on the back of the decline in tourism.

Local banks also recorded strong gains. DBS gained 4.4 per cent to $18.16, United Overseas Bank rose 3.3 per cent to $18.96, and OCBC Bank edged up 3.5 per cent to $8.36.

CGS-CIMB had upgraded OCBC to "add" from "hold" as the bank's shares now trade close to their 0.8 price-to-book value ratio seen in the global financial crisis, having dipped 27 per cent so far this year.

It also noted that the lender's share price was more resilient than that of its peers during both the global and Asian financial crises.

But OCBC has not been spared the overall target price cut of the banks, with the brokerage lowering its target price from $11.05 to $9.04.

The STI's performance was in line with other regional benchmarks, including Australia, China, Hong Kong, Malaysia and South Korea.

A version of this article appeared in the print edition of The Straits Times on March 21, 2020, with the headline 'STI ends losing streak, rebounds by 4.3%'. Print Edition | Subscribe