Bulls And Bears

Strong showing by local banks lifts STI

Analysts say index could breach July high if ongoing results season exceeds expectations

Local shares finished higher yesterday after a surge on Wall street and on a strong showing by two Singapore banks ahead of their third-quarter results.

The Straits Times Index went up 5.97 points or 0.18 per cent to close at 3,329.03.

"The STI is nearing 3,354, the previous high reached on July 27," remisier Desmond Leong said.

Some analysts believe there is a good chance the index could breach that level if the ongoing corporate results season exceeds expectations.

Shares in the United States helped the mood as well, with the Dow Jones Industrial Average up 0.4 per cent overnight to close just shy of 23,000 points.

Mr Leong added: "Property counters look OK as home prices seem to have bottomed out. Bank results should also be good as the worst of the non-performing loans from the oil and gas sector seems to be over."

DBS gained 0.7 per cent or 16 cents to $21.51, OCBC Bank rose 0.2 per cent or two cents to $11.50, while United Overseas Bank shed 0.2 per cent or six cents to $24.08.

OCBC will post its results on Oct 26 before the market opens, with the other two banks to follow.

UOB KayHian said UOB has seen a pickup in residential mortgages and will also benefit from an increase in collective sales.

"Bookings for residential mortgages from new sales increased by a double-digit quarter on quarter in second half 2017," it said.

The brokerage said the bank's management expects one to two more non-performing loans (NPLs) from firms in the energy sector in this half of the year.

"The new NPLs are from stronger companies that have withstood the onslaught of depressed prices for crude oil over the past three years. The amount of provisions required is expected to be lower," it said.

Oil and gas counters were boosted by the sale last week of nine jack-up drilling rigs by Sembcorp Marine to Borr Drilling for US$1.3 billion (S$1.8 billion).

Keppel Corp enjoyed positive spillover from the news as well but was flat at $7.13 yesterday ahead of its third-quarter results tomorrow.

Said Mr Leong: "When oil exploration starts to come to life, those in the downstream business and those servicing rigs will also benefit. This could be the start of the bottoming out of the oil and gas sector."

AEM Holdings extended gains, climbing nearly 7 per cent or 20 cents to $3.07 after it issued positive profit guidance for the first nine months of 2017 and the full year.

Telco M1 eased two cents at $1.785 after posting a third-quarter profit that was in line with expectations.

Other actively traded counters included Alliance Mineral, which dipped 3.8 per cent or 1.5 cents to 38.5 cents, with 77.5 million shares changing hands. Rowsley was flat at 13.8 cents, with 63.6 million shares on trade, while China Med International was stuck at 0.1 cent, with nearly 49 million shares traded.

A version of this article appeared in the print edition of The Straits Times on October 18, 2017, with the headline 'Strong showing by local banks lifts STI'. Print Edition | Subscribe