Markets Insights

Swiber Holdings' about-turn should keep the bears at bay

The sudden withdrawal by troubled oil services firm Swiber Holdings of its winding-up application may help put the brakes on the slide in local stocks, analysts expect.

The move buys time for the company to try to stage a turnaround and may also improve recovery efforts for creditors, they said.

News of Swiber's shock liquidation application last Thursday sent the Straits Times Index tumbling 1.71 per cent on Friday, erasing 2.6 per cent in total for the week.

But Swiber's move to discharge its provisional liquidators and put itself under judicial management could put a floor on the drop in banking stocks, analysts say.

DBS Group Holdings lost 5.4 per cent for the week, OCBC shed 4.2 per cent and United Overseas Bank sank by 4.5 per cent.

"At least we can now see some light ahead," CMC Markets Singapore analyst Margaret Yang Yan said. "This is positive news for the stock market because it buys time for Swiber to get an alternative rescue plan, or new lenders."

Banks may also get some breathing room. "At least DBS is not facing immediate losses on the book. Last week, the market was quite worried that Swiber isn't the only oil and gas firm in trouble. DBS has a big exposure on Ezra Holdings," she said.

But Ms Yang warned that as long as oil prices are below US$50 a barrel, the oil and gas sector will be under pressure and, in turn, the banks will be too as their non-performing loan ratios could rise.

Another factor that could help to alleviate the situation was Swiber's clarification on Friday that director and group chief financial officer Leonard Tay will continue as CFO, citing "an error" made earlier.

It also clarified that Mr Tay, group vice-chairman Francis Wong and director Nitish Gupta remain as directors of the group's subsidiaries.

"There has been a lot of panic in the market, and probably a lot of pressure on Swiber to get them back on the board. Because of their years of experience in running the company, they will be helpful in resolving its problems," Ms Yang said.

This week will be another significant one for corporate earnings. Second-quarter and first-half results are expected from key blue chips Sembcorp Industries tomorrow, StarHub on Wednesday and Perennial Real Estate Holdings on Friday. "StarHub's earnings could be a guide for what Singtel's earnings will be like," Ms Yang said.

"There hasn't been a lot of positive surprises in second-quarter corporate earnings so far," she said.

Traders are also eyeing the second-quarter results of Genting Singapore, CapitaLand and UOL Group on Thursday. UOB KayHian, which has a buy call on Genting Singapore, said rival Marina Bay Sands' second-quarter results, which came in below forecasts because of weak volumes in VIP gaming and mass gaming, could have a negative impact on the Singapore-listed casino operator's stock price.

"But the industry slowdown could have a milder impact on Genting Singapore, which has been hit hard in the past few quarters and has seen the formation of a low earnings base," one broker said.

A version of this article appeared in the print edition of The Straits Times on August 01, 2016, with the headline 'Swiber Holdings' about-turn should keep the bears at bay'. Subscribe