Greek bailout news lifts Singapore market
NEWS that the Greek parliament has voted to accept the bailout terms from the country's creditors helped lift the Straits Times Index 14.59 points to 3,353.45 on Thursday. Turnover, however, remained in the doldrums at 1.1 billion units worth S$918.6 million, of which S$621 million or 68 per cent was done in the 30 STI components. Still, excluding warrants, there were 235 rises versus 145 falls, so the session was relatively firm for the whole market.
Counterbalancing the news from Greece was high volatility in Hong Kong, where the Hang Seng Index first suffered a triple-digit loss before closing with a triple-digit gain.
Also a factor was the Wednesday testimony by US Federal Reserve chairman Janey Yellen that the US economy remains strong, suggesting that interest rates would be raised this year.
Petrochemical firm CEFC International continued to outperform, rising S$0.016 or 19 per cent to S$0.10 on volume of 77 million shares, the latter ensuring it topped the actives list. On Monday, the counter traded at S$0.034, which means it has gained 194 per cent in four sessions.
Other than Singtel, all other occupants of the top 20 actives list were priced below S$0.70. These included familiar names such as IHC, YuuZoo and Charisma Energy.
Among blue chips, DBS ended S$0.18 higher at S$21.38 on volume of 4.6 million shares. In a July 15 report on DBS, Nomura called a "buy" as it identified two possible catalysts in the second half.
"We believe DBS's Q2 results, which it will report on July 27, will demonstrate the upside to its profit from higher interest rates, and show stable credit cost, owing to its strong risk management," said Nomura.
"We believe the second data point would be in the form of an increase in the US Fed rate which we now expect in December. US interest rate increase should support DBS's share price as it will strengthen the case for further increases in local interest rates. We maintain our 'buy' rating and target price of S$24.30."
In the property sector, Macquarie Warrants (MW) highlighted CapitaLand as being attractive. It said Macquarie Equities Research (MER) in a July 13 report looked at CapitaLand's announcement of a joint venture with the Qatar Investment Authority to set up a US$600 million service apartment fund.
"With this JV, CapitaLand now manages 17 real estate private equity funds and five listed Reits with AUM (assets under management) over S$43 billion. Fee income reached S$145 million in FY2014 or about 4 per cent of group revenue," said MW.
"About 68 per cent of revenue is recurrent income." The push to further grow its fund management platform, MER believes, will help enhance its return on equity (ROE) over time. The shares are attractive, in MER's view, trading at 34 per cent discount to MER's relative net asset value and at 0.83x price book value. CapitaLand's shares ended S$0.04 stronger at S$3.33 on volume of 6.2 million shares done.
Deutsche Bank in its July 16 Asia Economics Monthly "Shadow from China" said taking into account several months of disappointing data flow and lack of improvement in the external demand outlook, it has scaled back the 2015 growth forecasts for Hong Kong, Indonesia, Singapore, South Korea, Taiwan and Thailand.
"As a result, our Emerging Markets Asia (ex China and India) forecast for the years has been revised down by 40 basis points to 3.9 per cent," said Deutsche, "Regional giants China and India's forecasts remain unchanged, but we recognise increasing downside risks there as well."
As for Greece, Rabobank probably summed it up best in its Thursday Global Daily when it noted that against a backdrop of throwing of Molotov cocktails by protesters, the country's parliament approved "a deal that it doesn't want, and which the IMF openly says won't work".
