Jul 23, 2014

    STI crawls to a 14-month high

    THE local market hit a fresh 14-month high yesterday, but failed to match the strong gains by some regional bourses.

    Thin volumes here also cast doubt on whether recent gains have been backed by much enthusiasm on the part of investors.

    The Straits Times Index rose 2.64 points or 0.08 per cent to 3,316.91, its highest since May last year.

    But market turnover was only $914 million, considerably lower than the past year's daily average of $1.11 billion.

    The local market has continued to rise despite the crash of Malaysia Airlines Flight MH17 in eastern Ukraine, which heightened political tensions between Russia and Western powers.

    "Though the local bourse would appear little affected by the news of the tragic downing of MH17, going by the marginal rise in the Straits Times Index, this would be too simplistic a summarisation," said NetResearch Asia, citing the low value of the transactions.

    "We expect markets to remain subdued, as continued news flow and rising tension point to more sustained uncertainty in the months ahead. The local results season is not expected to disappoint, but corporates will likely be more cautious on the outlook, making it harder to raise valuations in the face of uncertainty."

    Catalist-listed Spackman Entertainment Group had a good debut. The South Korean film production firm closed trading at 46.5 cents, up 79 per cent from the initial public offering (IPO) price of 26 cents.

    About 128.48 million Spackman shares were traded, making it the second most active stock of the day after Jaya Holdings.

    However, fellow debutant First Sponsor Group fell in its first day of trade. The mainboard-listed company, which develops and owns residential and commercial property in China, closed trading at $1.44, 4 per cent below the IPO price of $1.50.

    Markets elsewhere in the region rose strongly yesterday, led by Hong Kong's 1.7 per cent rise and the 1 per cent gain in Shanghai. Tokyo rose 0.8 per cent, while Seoul rose 0.5 per cent.

    The expectation among regional investors was that recent political tensions would not derail economic growth.

    "The past financial year saw solid to strong returns from most asset classes," said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors.

    "Investors should expect returns to slow over the year ahead and prospects for an eventual (Federal Reserve) rate hike could cause a bit of volatility.

    "But returns are likely to remain solid as share valuations are still reasonable, the global economy continues to grow... and monetary conditions remain easy."