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Fired-up investors chase STI to 10-year high

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The STI rose over 18 points on Monday and 13.8 points or 0.39 per cent on Tuesday to 3,550.21.

Singapore

WALL Street's surge last week and improved fundamentals around the world fired up investors who poured into Singapore equities on Tuesday - pushing the Straits Times Index (STI) to a 10-year high.

With over 4 billion shares traded over Monday and Tuesday, brokers believe the local stock rally still has legs. The STI rose over 18 points on Monday and 13.8 points or 0.39 per cent on Tuesday to 3,550.21.

Some analysts are even venturing that the index's all-time high - achieved in October 2007 - may be within reach soon.

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The Dow Jones Index 228-point rally last Friday (Wall Street was closed on Monday) played no small part in the local market's combined 29.6-point gain over two days. So too, the improving fundamentals in various sectors.

Of late, the recovery in oil prices has benefited not just offshore and marine companies but banks as well, CMC Markets analyst Margaret Yang told The Business Times.

She noted that with investors now less worried about the possibility of bad loans in the energy sector, "the high oil price is definitely a positive factor for Singapore".

Real estate has also seen a boom, notwithstanding the hike in all three local banks' home loan interest rates.

Last year's spate of collective sales are being compared with the en-bloc fever of 2005 to 2007, and the excitement has carried over into the new year.

Maybank Kim Eng analyst Derrick Heng stuck to "positive" on the property sector in a report on Monday.

DBS Bank's equities strategy team had noted at the start of the year that it "favours banks, property, consumer goods and offshore and marine sectors to ride the broad-based recovery as well as rising oil prices".

Singapore traders were not the only ones popping the champagne on Tuesday. The buying was replayed in the region, with the Hang Seng up 565 points to a record 31,904.75. The Japan and Shanghai markets also finished higher.

Ms Yang told BT that the Hang Seng's rise has helped to draw the interest of investors here. "Favourable overseas sentiment is injecting confidence into the local market," she said over the phone, adding that Singapore equities are lagging their regional peers.

Analysts had been holding their breath on STI's recent rise, with 3,549.85 the magic number to beat. That was when the index crested in 2015, in the wake of the global financial crisis. Its record close, in October 2007, stands at 3,831.19.

Carmen Lee, head of research at OCBC Investment Research, was cautious on where the STI might go next.

Approached for comment on Tuesday, she held to her view from the first week of the year, when she said that the STI could potentially reach 3,700 this year. "But anything beyond 20 per cent will bring valuations to a stretch, unless earnings come in strongly," she had added then.

Still, CMC Markets' Ms Yang professed faith that "fundamental elements are very supportive for the stock market rally". "3,800 looks quite far, but actually (the) market needs to run up another 7 per cent to reach this level," she added in an e-mail to BT. "If corporate earnings continue to improve and crude oil price remains at elevated levels, I won't be surprised to see this happen in the months to come.

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