Aug 12, 2014

    Muted STI rebound as world risks ease

    LOCAL shares rebounded yesterday, but the gains here fell short of the advances across much of the region.

    The benchmark Straits Times Index gained 17.56 points, or 0.5 per cent, to close at 3,306.45 on positive leads from Hong Kong and Wall Street as investors shrugged off concerns over geopolitical risks, after Israel and militants in the Gaza Strip agreed to a 72-hour truce while Russia sought to de-escalate the Ukraine conflict.

    But turnover stayed thin at 1.46 billion shares worth $765.2 million.

    Market players noted that the local bourse's gains underperformed those of other regional markets. Hong Kong's Hang Seng Index rose 1.3 per cent to 24,646.02 while Japan's Topix jumped 2 per cent. China's Shanghai Composite Index gained 1.4 per cent while Taiwan's Taiex Index added 1 per cent.

    Some blamed the thin liquidity at home on new regulations announced on Aug 1, in particular a rule imposing a minimum trading price of 20 cents for mainboard listings here, aimed at curbing excessive speculation and potential market manipulation.

    More than 200 listed companies with shares trading under 20 cents have about 18 months to meet that new requirement, mainly through share consolidation, before they are put on a watch-list. In a share consolidation, a firm reduces the number of its outstanding shares and, in doing so, boosts the share price.

    "We've been getting a lot of calls from investors over the past few days, wondering about the impact of the share consolidation rules. When a company consolidates its shares, the liquidity of the stock itself is affected," remisier Alvin Yong said.

    "They're asking questions like: What if, after a share consolidation, the price still drops below 20 cents, then what happens? Where do we draw the line?"

    The most active stocks yesterday included Dairy Farm International, which jumped 1.7 per cent or 17 cents to $10.17 after it said it had agreed to take a nearly 20 per cent stake in Shanghai-listed Yonghui Superstores worth about US$925 million (S$1.2 billion). Some 100,800 shares changed hands.

    Oil and gas explorer KrisEnergy rose 2.1 per cent, or 1.5 cents, to 75 cents a share, following news that the company will acquire Chevron Corp's Cambodia unit for US$65 million. Some 2.5 million shares changed hands.

    Shares of Ho Bee Land closed 1 cent higher at $2.20. It announced its second-quarter results after the market closed. The property group's net profit sank 54 per cent for the second quarter ended June 30 to $12.2 million, from $26.2 million a year ago.

    Last year, the group benefited from a $25.9 million gain on the disposal of Hotel Windsor in Singapore. Group turnover surged to $26.8 million, from $6.1 million a year ago, boosted by higher revenue from investment properties.