Singapore shares drift up, confusion over SIA value

SINGAPORE shares kicked off the week on a higher note on Monday, mirroring gains on Wall Street as countries prepare to reopen their economies gradually amid the Covid-19 pandemic.

The Straits Times Index (STI) opened at 2,597.85 and closed at 2,611.31, up 19.43 points or 0.75 per cent. Trade was relatively quiet, with 1.42 billion securities worth S$1.20 billion changing hands.

Brokers said they were bombarded with queries from clients still confused over the intrinsic value of the mandatory convertible bonds (MCBs) that Singapore Airlines (SIA) had also issued together with its rights issue.

"There is still a lot of confusion after Friday's wild swings,'' said one broker.

Another said given the uncertainty facing airlines, most of his clients are waiting to sell their rights come Wednesday.

SIA raised S$8.8 billion by issuing rights, and raised another S$3.5 billion via a 10-year MCB issue on the basis of 295 rights MCBs for every 100 existing shares owned. Priced at S$1 each, the bonds do not bear a coupon. If SIA does not redeem the 10-year MCBs before maturity, they may be converted into shares based on a conversion price of S$4.84.

Last Wednesday, Societe Generale (SocGen), issuer of daily leverage certificates on SIA, announced that the theoretical ex-rights price of SIA shares based on the previous close would be adjusted to S$3.71, instead of S$4.16 as many had assumed.

Jingyi Pan, IG's market strategist, warned the next couple of weeks would be crucial in the assessment of the sustained Covid-19 impact. "As global economies continue in efforts to ramp up economic activities once again, two biggest near-term risks perhaps persist in the form of Covid-19 case resurgence and further US-China tensions,'' she said.