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Singapore shares close higher in line with rise in Dow futures

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THE Straits Times Index (STI) on Thursday enjoyed its now-customary lift from the Dow futures, the latter's 20-point rise enabling the STI to gain 10.83 points at 2,960.78.

Turnover was average at 1.4 billion units worth S$1.2 billion and excluding warrants, there were 271 rises versus 129 falls.

Banks had a mixed outing - DBS and UOB closed lower while OCBC rose. Morgan Stanley (MS) in an April 21 report on Singapore banks, titled "A Lost Decade for Dividends'', said Singapore banks now have benefited from a sentiment rally from a rising oil price but offer limited upside.

"The recent recovery in commodity prices, especially the oil price, has eased some credit quality fears. However, Singapore GDP growth remains slow, concerns over the outlook for China remain, and even though the oil price has recovered, this has partly happened because of cuts in capacity, Singapore's O&G (oil and gas) support services sector will therefore remain weak," said MS.

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"Valuation multiples remain low in a historical context, but so does RoE and forecast EPS growth. Relative to global developed markets' banks valuation is slightly discounted, vs. a historical premium, but relative leverage is also at highs. Top-line pressures plus credit and capital uncertainty are expected to cap upside."

MS downgraded DBS to underweight, OCBC to equal weight and said UOB is its least preferred.

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