STI slips, but bull can still ride on economy, earnings

CAN the record-breaking stock market keep up its rallies, or is it time for investors to rein in the exuberance before losing their pants?

Market experts say the benchmark Straits Times Index (STI) has enjoyed a nice bull run since the start of 2018, and appears a tad exhausted. However, most do not expect any potential pullback to be more than 3 per cent, given the positive earnings report cards by blue chip companies so far and the overall economic health of Singapore and the rest of the world.

"The global economy is undergoing a phase of rare, broad, and synchronised growth, with indications that growth could indeed strengthen further in the first-half of this year," DBS economists say. They noted that the US is on track to report a third consecutive quarter of 3 per cent real gross domestic product growth and China continues to display surprising resiliency, despite some measures aimed at slowing activities.

On Friday, the STI ended 3,567.14, down 5.48 points, or 0.15 per cent. More than 1.6 billion shares, worth S$1.2 billion, were traded. There were 224 gainers to 217 losers.

Margaret Yang, market analyst at CMC Markets Singapore, sees 3,600 as the immediate resistance for the STI. Support is pegged at 3,500.

"This 3,600 is also a psychological resistance. Whenever the market moves up 100 points, it faces selling pressure as investors look to take profit," Ms Yang says.

Local banks, the main beneficiaries to momentum trades on rising rates, took a breather from recent rallies amid confusion over Washington's stance over the US dollar. Basically, a weak greenback, as construed from remarks made by US Treasury Secretary Steven Mnuchin mid-week, means inflation may spike up in the US this year as more foreign goods are imported. On the other hand, to achieve a strong dollar as clarified by US President Donald Trump in his latest comments, the US needs to raise rates. The market is generally expecting the Federal Reserve to raise rates by 3 to 4 basis points this year.

DBS, the largest bank by market value, hit S$26.73 a share, before ending at S$26.58, down 19 Singapore cents, or 0.71 per cent. Profit-taking also sent UOB and OCBC lower, at S$27.88 and S$13.04, respectively.

Diversified marine conglomerate Keppel Corp - seen as a barometer of the oil and gas sector here - got a thumbs up from analysts who deemed the worst is over for the group. Without the S$619 million provisions for the fines related to its operations in Brazil, it would have turned in a net profit S$836 million for FY 2017, which is 7 per cent higher than a year ago. DBS analyst Ho Pei Hwa reiterated her buy call on Keppel, with a target price of S$10.20 a share.

Keppel, which opened at S$8.52 a share, ended at S$8.63, up 5 Singapore cents.

Troubled commodities group, Noble, whose shares were trading around 30.5 cents each before trading was halted on Thursday, resumed trading lower on Friday. They hit 26.5 Singapore cents, before ending at 26 cents, down 4.5 cents, or 15 per cent.

Requests for trading halt by both ESR-REIT and Viva Industrial Trust fuelled speculation of a potential merger of the two reits.