STI flat as investors shrug off ECB decision

Focus shifts from extension of debt-buying programme to possible US interest rate rise

Local shares ended on a flat note yesterday after the European Central Bank's decision to extend its debt-buying programme failed to move investors.

Attention is now focused on what is widely tipped to be a rise in United States interest rates next week.

The Straits Times Index ended down 0.09 per cent or 2.73 points to 2,956.13, but is up 1.26 per cent for the week.

Profit-taking sent banks lower. DBS Group shed 1.7 per cent or 31 cents to $17.83 and UOB Group was down 0.5 per cent or 11 cents to $20.90. OCBC Bank lost 0.4 per cent or four cents to $9.26.

The possibility of a 25 basis point rate hike has been almost fully priced in by the market.

"DBS has had an unobstructed move of about 20 per cent for the past month. This is just a healthy pullback. Investors are awaiting the (US) decision next week before making further moves," KGI Securities Singapore strategist Nicholas Teo said.

DBS jumped about 21 per cent to a 12 month high of $18.32 on Wednesday from $15.13 on Nov 7.

"If the rate hike doesn't happen, that will shock the market because a lot of expectation that this will happen has been priced in. If it hikes by more than expected, say, by 50 basis points, the market will also be shocked," he said.

News that some DBS Hong Kong staff are being investigated by Hong Kong's anti-corruption agency for allegedly using bribery to obtain client data for marketing purposes may also have weighed on sentiment, Mr Teo added.

Meanwhile, Genting Singapore dipped 1.5 per cent or 1.5 cents to 98 cents after reports that Macau would limit daily ATM withdrawals as part of a Beijing-led crackdown on illicit capital outflows. But it pared losses after the government refuted the report. Some 42.9 million shares changed hands.

OCBC Investment Research has a buy call on Singtel, which was flat at $3.79 on trade of 12.6 million shares.

It cited the uncertain global economic outlook and noted that Singtel "is a good quality defensive yield stock, with non-cyclical earnings and strong cash generation ability".

"We also expect Singtel to be least affected by the fourth telco entry in Singapore, given its diversified earnings base."

Sembcorp Industries gained 1.4 per cent or four cents to $2.91 after UOB KayHian upgraded its call to market weight, saying that the firm "remains the safest proxy to the protracted shipping sector recovery".

Other actively traded counters include KrisEnergy, up 3.1 per cent or 0.6 cent to 20 cents, with 43.5 million shares traded; and Jasper Investments, ahead 7.1 per cent or 0.1 cent to 1.5 cents, with 43 million shares traded.

Golden Agri-Resources fell 3.4 per cent or 1.5 cents to 42.5 cents, with 35.7 million shares changing hands.

A version of this article appeared in the print edition of The Straits Times on December 10, 2016, with the headline 'STI flat as investors shrug off ECB decision'. Print Edition | Subscribe