Bulls And Bears

STI slides as optimism over trade deal fades

Weak factory output data also hurts mood; industrial stocks and banks among losers

Local shares followed their regional counterparts lower yesterday as investors became a bit less enthusiastic over seeming progress on United States-China trade talks.

The Straits Times Index dipped 10.69 points, or 0.33 per cent, to 3,261.66 with losers outnumbering gainers 215 to 185 on trade of 1.33 billion shares worth $1.09 billion.

US President Donald Trump initially raised hopes of signing a new trade deal with China, but said a deal "might not happen at all".

The local bourse also had salt rubbed into its wounds with data showing last month's industrial output falling to its lowest in 21/2 years, hit by declines in electronics and precision engineering.

Industrial stocks were among the top losers, with ST Engineering dropping 1.05 per cent to $3.75 while Sembcorp Industries lost 0.38 per cent to $2.64.

Financials also saw losses: OCBC led the way, down 1.15 per cent to $11.20 with United Overseas Bank off 0.35 per cent to $25.30 and DBS dipping 0.04 per cent to $25.17.

RHB Research Institute analyst Leng Seng Choon remains overweight on the banking sector as he expects room for net interest margin expansion this year.

He said: "Over the longer term, we expect more cost efficiencies from digitisation. Dividend yields are also attractive. We have 'buy' recommendations on UOB and DBS."

Tech-linked shares were among the most heavily traded by volume.

AEM Holdings added 4.76 per cent to $1.10 on trade of 32.73 million, Procurri gained 4.92 per cent to 32 cents, and Creative Technology ended at $4.89, up 1.88 per cent.

But Hi-P International was the standout, jumping 8.07 per cent to finish at $1.34 with 25.74 million shares traded, following brokers' reports signalling confidence in the stock amid the US-China trade war.

Maybank Kim Eng upgraded Hi-P International from "sell" to "hold", after it posted stronger-than-expected fourth-quarter results.

But PhillipCapital trader Marcus Toh thought the overall rise in technology stocks was also a result of traders chasing profits, led by Venture Corp's gains the day before.

Venture posted full-year results last week that were in line with lowered expectations. The street had also cheered Venture's margin expansion and higher dividends.

DBS analyst Carmen Tay wrote: "Net margin is a critical factor driving share price, which is currently well supported by changing business mix. According to our analysis, Venture's net margins have a direct correlation with its share price."

A version of this article appeared in the print edition of The Straits Times on February 27, 2019, with the headline 'STI slides as optimism over trade deal fades'. Print Edition | Subscribe