Jul 18, 2014

    STI remains range-bound on mixed news

    SINGAPORE blue chips inched higher yesterday, but further upside was capped as the bourse hit a 14-month high.

    The benchmark Straits Times Index rose 2.46 points or 0.07 per cent to 3,306.89, the highest close since May last year.

    The strong price rises on Wall Street have boosted markets here and around the region, but with the market in somewhat unfamiliar territory, there was naturally some apprehension.

    Yesterday, Singapore's shares were stuck in range-bound trading despite Wall Street's buoyant session on Wednesday, when the Dow Jones Industrial Average added 0.45 per cent.

    "Strong earnings from Intel and other positive corporate activity helped spur the Dow Jones Industrials overnight to another new high," said NetResearch Asia in a note.

    "Despite the continued rise on Wall Street, we think sentiment here will remain cautious, given the lacklustre Singapore gross domestic product numbers announced earlier this week and unconvincing comments that a manufacturing recovery will take place in the fourth quarter."

    Adding to the gloom were figures out yesterday, showing that last month's non-domestic oil exports fell 4.6 per cent year-on-year.

    This was a worse showing than economists had expected.

    Gainers on the STI yesterday included Noble Group, up 1.5 cents or 1.1 per cent to $1.415.

    Singapore Airlines dipped one cent or 0.1 per cent to $10.50.

    "We believe that the market is overly negative on Singapore Airlines (SIA), and is ignoring the strategic alliance with Virgin Australia that has entrenched its position in Australia," said Maybank Kim Eng Research.

    "With this partnership, we believe that SIA is better positioned on the Kangaroo route (Australia-Europe) than other Asian carriers. Over time, we expect foreign carriers - Emirates, Etihad and SIA - that have forged strong partnerships with domestic carriers to gain market share over other players on this route."

    Maybank Kim Eng has a "buy" call and target price of $12 on SIA.

    "Valuation remains near crisis levels, even though we expect recovery ahead."

    Outside the STI, First Real Estate Investment Trust gained two cents or 1.6 per cent to $1.25. This added to the rise of 1.5 cents on Wednesday.

    On Tuesday, the health-care Reit announced a distribution per unit of 2 cents for its second quarter ended on June 30, higher than the 1.85 cents it paid out a year ago.