Feb 03, 2016

    Traders keep an eye on falling oil prices

    SINGAPORE shares slid for the second straight day in line with Asian markets as investors kept a cautious watch on oil prices. The benchmark Straits Times Index closed 23.18 points or 0.89 per cent down to 2,579.23 on a quiet day with only 649.7 million shares worth $927.2 million transacted.

    Elsewhere, Tokyo pared 0.64 per cent, Hong Kong dropped 0.76 per cent, Kuala Lumpur was down 0.88 per cent and Sydney shed 0.99 per cent.

    Only Shanghai ended up, with a 2.26 per cent gain on the back of around 100 billion yuan (S$22 billion) in liquidity injected into the market by the People's Bank of China yesterday.

    Wall Street also had a down day overnight, losing 0.1 per cent, while oil prices began to falter again to drop below US$34 per barrel.

    Only eight of the 30 STI component stocks rose, led by Global Logistic Properties. The logistics facility developer put on four cents or 2.46 per cent to $1.665, recovering from Monday's 3.85 per cent drop as investors positioned themselves for the results this week.

    CapitaLand Mall Trust rose two cents or 1 per cent to $2.02, and Ascendas Real Estate Investment Trust closed up one cent or 0.43 per cent to $2.31.

    Hutchison Port Holdings Trust (HPHT), which yesterday announced a HK$860.6 million (S$158 million) profit for the quarter to Dec 31, ended flat at 47 US cents (67 Singapore cents) ahead of the results. With the recovery in the fourth quarter, HPHT's full-year earnings per unit went up 110.1 per cent year-on-year to 20.03 HK cents.

    The rest of the STI stocks had less spring in their step, with 18 blue chips down. Yangzijiang Shipbuilding fell 7.5 cents or 7.58 per cent to 91.5 cents, likely hit by profit taking after Monday's gain.

    The local banks kept falling.

    United Overseas Bank lost 38 cents or 2.14 per cent to $17.39, DBS Bank dropped 27 cents or 1.96 per cent to $13.51 while OCBC Bank pared 10 cents or 1.29 per cent to $7.63.

    Despite lingering concerns over bad debt and slowing loans growth, Singapore banks remain very robust institutions with strong earnings. Following the extensive sell-off, the banking plays are now quite affordable for the major corporates and heavyweight blue chips that they are.

    The trio's price-to-book ratios are all below one, with DBS at 0.86, OCBC at 0.95 and UOB at 0.99. The ratio compares a company's share price with its own book value. A figure below one commonly implies that a stock is undervalued.

    There is also value to be had in SIA Engineering, which dropped one cent or 0.29 per cent to $3.4 despite Monday's announcement of a 6.7 per cent net profit increase in the three months to Dec 31.

    The shares have dropped around 15 per cent from their last peak in November, and the latest results offered reasons to buy in, DBS Group Research analyst Suvro Sarkar said in a note yesterday.

    "Two things stood out. Core operating margins continued on a recovery trend to 10.5 per cent, and engine MRO (maintenance, repair and overhaul) centres registered sizeable rebound in profitability," he added.