Jul 01, 2016

    Stocks get a Wall St lift but analysts advise caution

    BULLISH Asian markets continued their post-Brexit rally but analysts are not yet convinced that the coast is clear. Regional bourses took their cue from the 1.64 per cent rise on Wall Street overnight.

    Singapore's benchmark Straits Times Index added another 48.2 points or 1.73 per cent to 2,840.93 in a lively session that saw $1.7 billion worth of shares changing hands.

    Hong Kong rose 1.75 per cent, Tokyo weakened through the day but was still up 0.06 per cent while Kuala Lumpur put on 0.72 per cent. Shanghai was down 0.07 per cent. But London's FTSE 100 opened weakly before rising 0.2 per cent by noon while sterling stayed range-bound around 1.34 against the greenback.

    "While global indices have recovered markedly, the pound is still weak, which suggests that investors are buying back equities not because they feel sanguine about Britain," IG market strategist Bernard Aw said.

    OCBC investment research head Carmen Lee is also cautious: "Volatility is likely to remain in the market due to a couple of factors, including the impact of the Brexit on the rest of Europe and on Britain and slower global economic growth.

    "As of now, it looks like there is a growing probability of no hike for this year and even expectations from some economists of a cut in (United States) interest rates.

    "And then there's the US Presidential election at the end of the year. This will continue to add to the uncertainty in the market," she added.

    Against this backdrop, investors should go for defensive stocks, especially telecommunications and local real estate investment trusts for their yields, Ms Lee said, naming SingTel as OCBC's top telco pick.

    SingTel was one of the 26 STI component stocks that rose yesterday, closing up nine cents or 2.23 per cent at $4.13.

    It was also one of the hottest counters, with 64.6 million shares traded.

    Hutchison Port Holdings Trust was the top-gaining blue chip, rising two US cents or 4.6 per cent to 45.5 US cents.

    Golden Agri-Resources added 1.5 cents or 4.48 per cent to 35 cents.

    Only two STI stocks ended in the red. CapitaMall Trust was off five cents or 2.29 per cent to $2.13 and City Developments dropped six cents or 0.73 per cent to $8.14.