Bulls And Bears

Traders shrug off weak GDP estimates

STI manages to close up slightly, with local banks all ending higher

Local investors shrugged off yesterday's disappointing advance estimates for second-quarter GDP to send the market higher.

The Straits Times Index (STI) closed at 3,357.34 points, up 6.89 points or 0.2 per cent but down 0.3 per cent for the week.

Singapore Exchange market strategist Geoff Howie noted yesterday that "the GDP estimate was expected by economists to be weighed by the outward-orientated manufacturing sector".

He added: "However, concerns on the laggard indicator of activity were allayed somewhat this week by US Federal Reserve chairman Jerome Powell."

Last week's strong US employment numbers meant that investor sentiment this week was mostly driven by the question of just how much the Fed would lower interest rates, probably from this month.

There were concerns that the extent of rate cuts might have been overestimated but they were laid to rest when Mr Powell said on Wednesday the latest employment report did not change the interest-rate outlook.

Singapore's poor advance GDP estimates suggest that Mr Powell's point - that a key consideration for the Fed's interest rate stance was that manufacturing and trade-related sectors were weak globally - is right on the money.

Trading volumes clocked in at 1.07 billion shares worth $1.03 billion, with losers outpacing gainers 235 to 181, but only 10 of the STI's 30 components closed in the red.

Thai Beverage was the index's most active stock, closing 1.7 per cent lower at 86.5 cents on trade of 30.8 million shares. A trader noted: "Investors could have booked profits following the recent share rally."

The local banks ended higher. DBS gained 0.7 per cent to $25.78, OCBC edged up 0.3 per cent to $11.51 and United Overseas Bank added 0.3 per cent to $26.53.

Among real estate investment trusts (Reits), Keppel-KBS US Reit put on 1.9 per cent to 80.5 US cents after RHB Research Institute initiated coverage on the firm with a "buy" recommendation and a target price of 88 US cents. Analyst Vijay Natarajan said despite the Reit's units posting a strong price gain of 29 per cent in the year to Thursday, they are still undervalued.

Venture Corporation dropped 2.7 per cent to $14.90 after key customer Illumina cut its revenue-growth expectations for 2019.

CGS-CIMB analyst William Tng maintained a "hold" on the firm but lowered the target price to $15.73, adding that Venture's "short-term outlook could be challenging".

A version of this article appeared in the print edition of The Straits Times on July 13, 2019, with the headline 'Traders shrug off weak GDP estimates'. Print Edition | Subscribe