Singapore market stuck in limbo

CAUGHT between Pyongyang and rising US 10-year treasury bond yields, the Singapore stock market appears going nowhere, for now.

The yield on the US 10-year treasury note touched 3.07 per cent on Tuesday, its highest since 2011, and a psychologically significant level that experts said could make equities appear less attractive.

In addition, there was some political uncertainty surrounding North Korea, after Pyongyang signalled its leader, Kim Jong Un, might pull out of the June summit with US President Donald Trump amid ongoing joint military drills involving South Korea and the US. The meeting to be held in Singapore may be scuttled if the US insists on denuclearisation for the isolated nation, news agencies reported.

"Uncertainty over geopolitical meetings and agreements weighed down on the index... The region is hyper sensitive leading into trade talks between China and the US, and supposed US-North Korea nuclear talks," said Oriano Lizza, a sales trader at CMC Markets.

The Hang Seng drifted 168 points lower. Japan's Nikkei bucked the trend, bouncing off morning lows to end 121.14 points up from Wednesday's close as the yen weakened, said Eli Lee, head of investment strategy at the Bank of Singapore. Manufacturing data confirmed Japan's shrinking economy.

The Singapore market did not draw any inspiration from the April non-oil domestic exports (NODX), which rose 11.8 per cent on year, reversing the revised 3.2 per cent on year contraction recorded a month ago. April's NODX growth was supported by robust expansion in the non-electronic exports segment, which offset a decline in electronics exports.

Electronics NODX fell 6.9 per cent on year in April, from the downwardly revised 7.5 per cent on year contraction a month ago. This was the fifth consecutive month of decline.

"Today's release of April NODX confirmed the views reiterated in our past reports that high base effects have started to kick in. The very strong on-year growth rates in exports for most of 2017 may not be sustained as we move towards the second-half of 2018," Francis Tan, UOB economist, said. Mr Tan expects 2018 NODX to expand at a slower pace of 6.5 per cent, compared to the 8.8 per cent achieved in 2017.

Jingyi Pan, market strategist at IG, said: "While the positive NODX data this morning helped to lift the local market, the elevated bond yields nevertheless stuck out like a sore thumb, inducing worries and weighing upon the Straits Times Index (STI) into the session.

After opening around 3,545.90, and hitting 3,550.62, the benchmark Straits Times Index (STI) ended at 3,536.76, up 3.71 points, or 0.11 per cent. More than 1.47 billion shares, worth S$1 billion, changed hands, with 174 gainers to 225 losers.

Ms Pan sees immediate support and resistance for the STI at 3,521 and 3,576, respectively.

On Thursday, Singtel reported a 19 per cent fall in its fourth-quarter net profit, hurt by lower contributions from its regional associates in Indonesia and India as well as adverse currency movements.

Singtel, South-east Asia's largest telecom operator, posted net profit of S$781 million for the three months ended in March, compared with S$963 million a year ago. Underlying net profit, which excludes one-time items, fell nearly 18 per cent to S$807 million.

DBS Group Research has kept its "buy" call, with target price unchanged at S$3.85 a share.

"Singtel expects to maintain its ordinary dividends of 17.5 Singapore cents per share for the next two years and will revert to the payout of between 60 per cent and 75 per cent of underlying net profit thereafter," Sachin Mittal, DBS analyst, said.

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