STI ends the week firm, up 6.4% for 2017

NEW US president Donald Trump's actions continued to dominate headlines this week, even if it now appears very likely that his "America First" campaign slogan will translate to protectionist trade practices and greater insularity that could damage the global economy.

In Singapore, the return of some degree of "animal spirits" helped push the Straits Times Index past 3,000 on Jan 11 and has now enabled the index to cross 3,050, perhaps not that significant a milestone as far as chart technicians are concerned but certainly important psychologically.

On Friday, a 13.07-point rise for the STI took it to 3,064.85, though overall turnover was low even for a half-day session at 865.8 million units worth S$585 million. Excluding warrants, the advance-decline score was 172-144.

For the week the index's gain was 53 points or 1.7 per cent, bringing its 2017 rise to 6.4 per cent. Given recent weakness in the US dollar because of comments made by Mr Trump, the STI has vastly outperformed Wall Street - even if the latter is at an all-time high - with a 2017 gain of 7.7 per cent in

US dollar terms versus 1.7 per cent for the Dow Jones Industrial Average.

Credit Suisse, in its Jan 26 report "Singapore equities: Promising start to the Year of the Rooster", noted that the STI has been outperforming the MSCI Asia Pacific Index since November, mainly as US interest rate expectations prompted a play on bank stocks.

"Over the next few weeks, we expect the market spotlight to be on the recommendations from the Committee on the Future Economy (CFE) and the Singapore Budget (expected on Feb 20)," said CS.

However, it did warn that the interest rate play on banks may have been overdone. "A net interest margin improvement, thanks to the re-pricing of loans as interest rates rise, should also boost revenue growth, but so far the short rates, as represented by the 3M Sibor, have only increased by 10 bp from the low in 2016," said CS. "So unless the short end moves more substantially, the margin impact on earnings is going to underwhelm."

Keppel Corp on Thursday announced a 48.6 per cent drop in net profit for 2016 to S$783.9 million, including a 64.7 per cent fall in Q4 net profit to S$143 million. On Friday, Keppel's shares dropped S$0.12 to S$6.27 on volume of 5.7 million despite trading cum-dividend. The company has declared a final dividend of S$0.12 per share.

OCBC Investment Research described the figures as "below expectations" and maintained its "hold" on Keppel. "We increase our P/B (price/book) for the O&M (offshore & marine) segment from 0.8x to 0.9x, and also update other estimates in our SOTP (sum-of-the-parts) valuation. This results in a higher fair value estimate of S$6.26 (previously S$5.71)."

On the domestic economy front came the surprise 21.3 per cent jump in December industrial production, a five-year high and the fifth consecutive year-on-year expansion.

Maybank Kim Eng economist Chua Hak Bin said a synchronised global recovery appears to be underway, and Singapore, being a small open economy, is experiencing a strong cyclical uplift. "Manufacturing and trade-related services (wholesale trade, transport & storage) are showing visible signs of acceleration", he said in his Jan 26 macro report.