Local stocks up on oil prices, Fed rate hopes
SINGAPORE shares rallied 2.22 per cent yesterday in tandem with the rest of Asia, buoyed by rebounding oil prices and speculation that the Federal Reserve will refrain from lifting United States interest rates this year on further signs of slowing global economic growth.
The benchmark Straits Times Index extended gains for a third straight session, surging 64.40 points to 2,961.81 on a blue-chip-led rally by the three local banks, Keppel Corp, Wilmar International and Genting Singapore.
DBS Group Holdings jumped 3.3 per cent or 56 cents to $17.48, OCBC climbed 2.9 per cent or 26 cents to $9.32, while United Overseas Bank surged 3.6 per cent or 67 cents to $19.52. Keppel Corp rose 3.8 per cent or 26 cents to $7.18, Wilmar International gained 4.7 per cent or 13 cents to $2.89, while Genting Singapore jumped 6 per cent or 4.5 cents to 79.5 cents.
The International Monetary Fund cut its global growth forecasts for a second time this year on Tuesday, citing weak commodity prices and a slowdown in China, and warned that policies aimed at increasing demand were needed. It forecast the world economy would grow at 3.1 per cent this year and by 3.6 per cent next year. Both new forecasts are 0.2 percentage point below its July forecast.
Also extending the rally in local shares are their more attractive valuations relative to US and European equities.
"The near-16 per cent slump in the STI during the third quarter had pulled the price-to-equity ratio from 15 times down to a two-year low of 12.6 times as at the end of September, making it one of the lowest in the region," IG market strategist Bernard Aw said.
"A strong rally in Hong Kong equities...since the Oct 1 market holiday, may have helped bolster sentiments.
"Given that China markets are away for a week-long national day break through Wednesday, investors may have used Hong Kong as a proxy trade for the mainland equities. This suggests that Chinese equities could resume trade today on a positive note. Clearly, this is beneficial to Singapore shares," he added.
Oil-related counters were among the most actively traded as US oil approached US$50 a barrel for the first time since July, while shares of Singapore flag carrier SIA fell 0.6 per cent or six cents to $10.64, on prospect of higher fuel prices.
Ezra Holdings jumped 7.9 per cent or 0.9 cent to 12.3 cents, with 135 million shares traded; Vallianz soared 13 per cent or 0.6 cent to 5.2 cents, with 83 million shares traded.