Bulls And Bears

Muted recovery as nuclear fears remain

Markets see a sluggish day as investors hedge bets over potential Korean escalation

Local traders recovered a little from their nuclear jitters yesterday, amid uncertainty over tensions on the Korean peninsula.

The benchmark Straits Times Index closed up 20.29 points, or 0.63 per cent, to 3,251.26 - a gain that did not quite make up for the 46.29-point slide on Monday.

All three local banks rose, but only DBS bounced back fully - reversing Monday's 27-cent drop to close up 34 cents, or 1.7 per cent, at $20.69.

Its gains come in the wake of news that it has secured the Reserve Bank of India's approval to turn its Indian franchise into a wholly owned unit, with 75 to 90 new branches planned.

OCBC Investment Research analyst Carmen Lee noted yesterday morning: "We expect this move to be a long-term positive... as it strengthens its presence in this market. Indian banks such as State Bank of India and HDFC Bank have seen a significant jump in market capitalisation in the past few years."

She added: "While we have a hold on the stock with a fair value estimate of $22.40... the current price weakness presents a good opportunity to re-enter this stock."

Meanwhile, OCBC Bank was up by 16 cents, or 1.5 per cent, at $11.08, and UOB closed higher by 14 cents, or 0.6 per cent, at $23.73.

Singtel recouped half of Monday's decline, rising two cents, or 0.5 per cent, to $3.68.

Yangzijiang Shipbuilding was another gainer, ahead two cents, or 1.4 per cent, to $1.415.

DBS Equity Research analyst Ho Pei Hwa last week reiterated a buy call for the stock, with the target price unchanged at $1.70, on the back of the placement of 137 million new shares.

"We believe the fundraising is a harbinger for mergers and acquisitions," she noted then. "Furthermore, we believe the possibility of dual-listing in Hong Kong should not be ruled out, in the event of sizeable acquisitions that require larger-scale fundraising exercises."

Other Asian markets remained muted yesterday, with Seoul down 0.13 per cent after registering a drop of 1.19 per cent on Monday. Tokyo fell by 0.63 per cent, thanks to pressure on exporters as the safe-haven yen strengthened against the greenback.

AxiTrader analyst Greg McKenna wrote: "Traders are clearly betting that, like so many other times before, the tensions on the Korean peninsula will be eased with words, not military action."

But, noting US Ambassador to the United Nations Nikki Haley's comment that Pyongyang is "begging for war", Mr McKenna added that "it's remarkable that traders are so sanguine".

Mizuho Bank head of economics and strategy Vishnu Varathan told Bloomberg that the markets are "a little bit bifurcated" now.

"They do realise that the tail risks are rather large... but they are also betting against that, which is exactly why they are buying the dips."

A version of this article appeared in the print edition of The Straits Times on September 06, 2017, with the headline 'Muted recovery as nuclear fears remain'. Print Edition | Subscribe