Singapore shares rose 2.22 per cent yesterday, in tandem with the rest of Asia, buoyed by rebounding oil prices, and on speculation that the US Federal Reserve will refrain from lifting interest rates this year on further signs of slowing global economic growth.
The benchmark Straits Times Index (STI) extended gains for a third straight session, surging 64.40 points to 2,961.81 on a blue-chip led rally by the three local banks, Keppel Corp, Wilmar International and Genting Singapore.
DBS Group jumped 3.3 per cent or 56 cents to $17.48, OCBC climbed 2.9 per cent or 26 cents to $9.32 and United Overseas Bank surged 3.6 per cent or 67 cents to $19.52.
Keppel Corp rose 3.8 per cent or 26 cents to $7.18, Wilmar International gained 4.7 per cent or 13 cents to $2.89 and Genting Singapore was up 6 per cent or 4.5 cents to 79.5 cents.
The International Monetary Fund cut its global growth forecasts for a second time this year on Tuesday, citing weak commodity prices and a slowdown in China. It warned that policies aimed at increasing demand were needed. Also, it forecast the world economy would grow at 3.1 per cent this year and by 3.6 per cent in 2016. Both new forecasts are 0.2 percentage point below its July forecast and are 0.4 percentage point and 0.2 percentage point below its April outlook, respectively.
"The near 16 per cent slump in the STI during the third quarter had pulled the price-to-equity ratio from 15 times down to a two-year low of 12.6 times as at the end of September, making it one of the lowest in the region," IG market strategist Bernard Aw said.
"A strong rally in Hong Kong... since the Oct 1 market holiday may have helped bolster sentiments.
"Given that China markets are (on) a week-long national day break through Wednesday, investors may have used Hong Kong as a proxy trade for mainland equities. This suggests that Chinese equities could resume trade today on a positive note. Clearly, this is beneficial to Singapore shares," Mr Aw added.
Oil-related counters were among the most active as US oil approached US$50 a barrel for the first time since July, while shares of Singapore flag carrier SIA fell 0.6 per cent or six cents to $10.64, on prospect of higher fuel prices.
Ezra Holdings rose 7.9 per cent or 0.9 cent to 12.3 cents, with 135 million shares traded; Vallianz surged 13 per cent or 0.6 cent to 5.2 cents, with 83 million shares traded; Rex International gained 7.4 per cent or 0.7 cent to 10.2 cents, with 58.7 million shares traded; Ezion rose 9.8 per cent or 6.5 cents to 72.5 cents, with 51.9 million shares traded.
"Nobody expected the STI rally to be this strong, and it's too early to say if it is sustainable. A lot depends on what (Fed chief Janet) Yellen says at the October FOMC meeting and how Singapore corporates perform in the third-quarter earnings season," remisier Alvin Yong said.