Singtel, HK Land drag STI lower

THE Straits Times Index (STI), which last Wednesday had been pushed up 20 points, on Monday fell back by 14.36 points or 0.4 per cent to 3,421.30, dragged lower mainly by selling of Singtel and Hongkong Land (HKL).

The session was otherwise relatively tame and unremarkable - turnover of 1.06 billion units worth S$1.3 billion was in line with recent daily totals and the advance-decline score excluding warrants was 224 to 214.

Within the STI, Singtel's S$0.12 or 2.8 per cent drop to S$4.16 on volume of 29.1 million cut 10.3 points off the index, while HKL's US$0.18 drop to US$7.63 sliced off another 3.4 points. These falls outweighed gains in other blue chips such as DBS, which rose S$0.20 to S$19.65.

As Hong Kong closed in the black and with Europe opening firm across the board, speculation was that the selling was in anticipation of Wall Street sliding on Monday.

Among other index gainers was commodities group Noble, which last week saw its shares plunge 13 per cent over two days following the release of a "sell" report from Iceberg Research.

Elsewhere, pressure on offshore and marine stocks has eased in recent weeks in line with some stability in the oil market. In Monday's session, stocks in the segment were mainly lower - Keppel Corp dropped S$0.10 to S$8.67 and Sembcorp Industries (SCI) ended S$0.02 weaker at S$4.22 on volume of 4.7 million.

In a Feb 17 "neutral" report on SCI, Goldman Sachs said it has raised its 2015-16 earnings per share estimates by 2-3 per cent mainly because of higher earnings from Sembcorp Marine, and has now upped its 12-month target price for SCI to S$4.10 from S$4 previously.

Some brokers speculated that traders might have spent most of the morning and afternoon waiting for the government's Budget to be unveiled, but most rejected this since Budgets have proven in the past to be non-market-moving events.

"The index jumped for no reason on Wednesday before Chinese New Year, so it's now giving back those gains," said a dealer.

Another likely factor at work was worries about Greece - even though its government on Friday managed to secure a four-month extension to its bailout terms, it still had until Monday to submit a list of reforms acceptable to the "troika" which comprises the European Central Bank, the European Commission and the International Monetary Fund.

As Rabobank noted in its daily notes, the only substantive victory that Greece's ruling Syriza party has won so far is in renaming the troika as "the institutions".

"Greek pleas that austerity has been ruinous for both them and most of periphery Europe have been effectively ignored by The Institutions, and (on Monday) we will see if Syriza is really willing to swallow that truth," said the bank.

As for US interest rates, Macquarie Equities Research (MER) said since the dovish Jan 28 Federal Open Market Committee meeting minutes were released, several developments have transpired that argue in favour of rates being raised earlier rather than later.

"First, January's employment report (released in early February) was the strongest in several years. Not only did it involve robust job gains, but there were substantial upward revisions to previous months ... " said MER.

"Second, the Jobs and Labor Turnover survey released last week showed the private sector job openings rate, hires rate, and quits rate all at cycle highs. Increased turnover has typically been a leading indicator of wage inflation. Finally, the price of crude oil has increased by more than 15 per cent since 28 January."

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