Bulls And Bears

STI up on better oil prices, China outlook

It sustains fourth day of gains but trading volume on local bourse remains weak

Singapore shares gained ground for a fourth straight day as China's growth outlook showed further positive signs and oil prices firmed up their recent gains.

The mainland economy grew 6.7 per cent in the third quarter to stay on track to meet Beijing's 6.5 to 7 per cent full-year growth target, official data disclosed yesterday.

News that the crude oil stockpile in the United States fell 3.8 million barrels over the past week offered another reason for the markets to cheer, pushing crude futures Brent above US$52 a barrel.

The Dow Jones Industrial Average added 0.42 per cent, and Singapore shares took the cue. The benchmark Straits Times Index (STI) closed 13.99 points, or 0.49 per cent, higher at 2,844.62. Since last Thursday, the STI has gained around 1.4 per cent.

Shanghai added 0.03 per cent, Tokyo was up 0.21 per cent, and Sydney put on 0.45 per cent. Hong Kong, however, pared 0.38 per cent.

Trading volume on the local market remained weak. There were 1.64 billion shares traded but they were worth only $790 million. The FTSE All Share Index showed mainboard volume has dropped for five straight sessions since last week.

"The STI is just a basket of 30 stocks, and it doesn't tell the whole story about the market, where investors remain risk-averse and unconfident about the macro-environment, especially with the Singapore growth stagnating," remisier Alvin Yong said. "The oil prices may be stabilising, but maybe it's too little, too late, when you look at all the news around bond defaults in the offshore and marine sector."

On Tuesday, Ezra Holdings said it is seeking waivers on its bond covenants - the latest in a string of woes in the sector. Ezra slipped 0.3 cent, or 5.56 per cent, to 5.1 cents.

But STI component Keppel Corp added seven cents, or 1.31 per cent to $5.42, one of the 21 blue chip stocks that ended in the black.

The top gainer was Sats, up nine cents, or 1.91 per cent, to $4.79, while Golden Agri-Resources added half a cent, or 1.33 per cent, to 38 cents, with 24.9 million shares traded.

StarHub was the top loser of eight STI counters that ended lower. Its shares fell six cents, or 1.74 per cent, to $3.39. M1 outside the STI also dropped, down 12 cents, or 5.15 per cent, to $2.21, after a 23.4 per cent drop in its third-quarter net profit.

Singapore Technologies Engineering shed one cent, or 0.31 per cent, to $3.18. In a note, DBS analyst Suvro Sarkar gave it a target price of $3.55 with a buy call, despite news it will likely cease some Chinese operations under ST Kinetics.

"In the likely scenario that production ceases, ST Engineering via ST Kinetics will record a $61 million one-off charge in the third-quarter financials. We estimate the full-year impact on revenue to be $30 million to $35 million arising from the cession of operations... which is only 0.5 per cent of both our 2016 and 2017 revenue forecasts."

A version of this article appeared in the print edition of The Straits Times on October 20, 2016, with the headline 'STI up on better oil prices, China outlook'. Print Edition | Subscribe