STI avoids sixth straight loss - just

THE Straits Times Index on Wednesday underwent a volatile session spent tracking movements in Hong Kong and China as well as the futures market for US benchmarks.

It first fell 15 points to an intraday low of 2,772 before rebounding into positive territory in the wake of gains in the Hang Seng and Shanghai Composite and a 140-point or 0.9 per cent rise in the Dow futures that brought hope that Wall Street would rally on Wednesday.

Most of these gains were erased at the close, though the index managed to avoid a sixth straight loss when it finished with a nett gain of 2.95 points at 2,790.89.

For the quarter, it shed 527 points or 16 per cent. For the year to date, it has lost 17 per cent.

Turnover on Wednesday was boosted by active trading in commodity stocks Noble and Golden Agri, as well as Singtel. These three STI components helped the 30-stock index record volume of S$1.07 billion, which in dollar terms was 82 per cent of the entire market's turnover of 1.1 billion units worth S$1.3 billion that was done.

Brokers however, warned that the index's Tuesday bounce of 47 points off its intraday low that day which was followed by a similar move on Wednesday probably does not indicate that the worst is over.

"China's slowdown amidst structural reforms is probably not over yet," said a dealer. "The same applies to the correction in its stock market."

Shares of the Singapore Exchange (SGX) on Wednesday traded ex-dividend and fell S$0.16 to S$7.03 on volume of 4.6 million. SGX is paying a final dividend of S$0.16 per share.

RHB called a "buy" on SGX saying it was time to take a another look at the exchange which is a monopoly that has nett cash. It set a target price of S$8.13 based on 23x FY17 forecast earnings.

"Using DCF (discounted cash flow) as a corroborative valuation methodology, we derive a S$8.20 fair value, which is close to our P/E-derived target price," RHB said.

In the transport sector, shares of rail operator SMRT ended S$0.015 higher at S$1.305 on volume of 2.1 million. OCBC Investment Research called a "buy", saying that news that SMRT will be fined S$5.4 million for a July 7 breakdown has removed a major market concern.

"Coupled with the fine, we believe SMRT has learned its lesson and expects it to ramp up maintenance processes to prevent future lapses . . . In our view, with Singapore's GE15 over and the new transport minister appointed, we do not rule out the possibility that the rail reform could potentially be accelerated. Keeping our forecasts unchanged, we reiterate BUY with fair value of S$1.45."

DBS's chief investment officer Lim Say Boon in his 4Q Investment Outlook said the unfinished business from the global financial crisis of 2008-2009 will likely continue to drive prices lower over coming months.

"For all the money printed and despite zero to negative interest rates, global economic growth has been slowing, deflation/disinflation is gathering momentum, and emerging markets (EM) are facing serious economic and financial market pressures," said Mr Lim.

"EM equities are already in a bear phase, and this should gather downside momentum in coming months. The EM selldown will likely be driven by a further slowing in economic growth, weakness in global demand, low commodity prices, acceleration of fund outflows amidst current account deficits, and higher political risk premiums."

Rating agency Standard & Poor's in a report titled "China's Trading Partners Have Nowhere To Hide As Growth Slows" said as China slows to a new steady-state rate of growth, economies that export mainly commodities to China are worse off as their exports will fall faster.

"On the other hand, exporters of manufactured goods to China, who have seen their exports fall sharply for a given rate of growth over the past decade or so, will be spared, at least in relative terms," said S&P.

For full listings of SGX prices, go to http://btd.sg/BTmkts