Apr 29, 2014

    STI buffeted by foreign headwinds

    LOCAL shares started the week on the back foot, in line with a broad regional sell-off following losses on Wall Street and concerns over the deteriorating situation in the Ukraine.

    The lead from the United States was broadly negative, with the tech-rich Nasdaq down 1.8 per cent on Friday, while disappointing earnings from Amazon and carmaker Ford sent the Dow Jones Industrial Average tumbling 140.19 points or 0.9 per cent to 16,361.46.

    Investors here took note and sent the benchmark Straits Times Index down 24.86 points, or 0.76 per cent, to 3,242.71 on turnover of $1.16 billion.

    "The market is starting to price in Ukraine risk, but not that of a full-blown war between Russia and Ukraine's allies yet," said remisier Alvin Yong.

    New sanctions are also being imposed on Russia by the US and the European Union, as the crisis escalates amid the detention of international observers by pro-Russian separatists.

    The banking sector continued to contribute to most of the index's decline here. UOB fell 32 cents or 1.43 per cent to $22.14, DBS Group Holdings slipped eight cents or 0.5 per cent to $16.72, while OCBC dropped 17 cents or 1.77 per cent to $9.45.

    Sembcorp Industries was another laggard, down 17 cents or 3.1 per cent to $5.38, with 4.34 million shares changing hands.

    Weak first-quarter earnings weighed on CapitaLand, which shed 1.54 per cent or five cents to $3.19, with 11.1 million shares changing hands.

    The property giant posted a first-quarter net profit of $182.8 million on Friday, down 1.7 per cent from a year ago, due to the absence of a one-off portfolio gain, while revenue dropped 3.4 per cent to $612.6 million.

    DBS Equity Research maintained a "buy" recommendation on CapitaLand.

    "Apart from its growing operations in Singapore and China residential, new contributions from CapitaGreen and its $90 million divestment gain from Westgate mall, as well as cost management activities, should lift profits in fiscal 2014 and 2015," it said yesterday.

    "With the recent rationalisation of its stake in Australia-listed Australand and the ongoing privatisation offer for CapitaMalls Asia, CapitaLand is set to enjoy higher return on equity going forward."

    The gainers included SMRT Corp, up 0.8 per cent, or 1 cent, to $1.27, after stealing the spotlight on Thursday with a one-day jump of 21.6 per cent in its share price.

    Investors will be eyeing the US Federal Reserve meeting this week, when the central bank is expected to continue tapering its monthly bond purchases, cutting the amount by a further US$10 billion (S$13 billion) to US$45 billion per month.