Virus fears continue to unsettle investors

WALL Street turned in a slightly positive showing on Wednesday, thanks to strong earnings by US corporates, but regional equity markets failed to follow suit.

Investors in Asia remain unsettled over how the Wuhan coronavirus will spread across the Chinese New Year holidays.

Singapore's Straits Times Index (STI) was mired in the red, closing at 3,234.56 on Thursday, after giving up 19.37 points or 0.6 per cent. North-east Asian benchmarks in China, Hong Kong, Japan and South Korea averaged a 1.5 per cent fall.

The nature of the virus draws parallels to 2003's Sars epidemic and investors are rightly concerned, but the Chinese authorities have been steadfast in containing the spread by effectively putting Wuhan in quarantine.

With that in mind, Oanda Asia-Pacific senior market analyst Jeffrey Halley noted that Asian markets' performance "looks more precautionary than panic-driven".

Trading volume continued to be heavy at 2.19 billion securities, 85 per cent over the 2019 daily average. Total turnover was S$1.44 billion, 36 per cent over last year's daily average.

Decliners trumped advancers 285 to 152, with 27 of the benchmark's 30 counters ending in the red.

Thai Beverage, the biggest STI gainer in 2019, was one of the blue-chip index's main laggards, with shares down 9 per cent this week, after dipping 0.5 Singapore cent or 0.6 per cent to 79 cents on Thursday.

Nomura analysts attributed share price underperformance to profit-taking as well as market concerns over the new law against drunk driving in Vietnam, but added that recent price weakness presented an opportunity to accumulate ThaiBev, which trades at lower valuations to peers.

Even though the Reit (real estate investment trust) earnings season is underway, attention was on the latest attempt at consolidation in the sector.

On Wednesday, CapitaLand Commercial Trust (CCT) and CapitaLand Mall Trust (CMT) unveiled plans to form CapitaLand Integrated Commercial Trust (CICT). Subject to unitholder approval, the combined entity will be the biggest Reit in Singapore and the third-largest in the Asia-Pacific.

DBS Group Research analysts Derek Tan and Rachel Tan said: "A bigger platform, CICT will be empowered with greater financial capacity and better ability to compete globally to take on bigger projects and/or redevelopments to drive better returns to shareholders."

Acknowledging that size, scalability and diversification are key to driving Reit performance, RHB Securities analyst Vijay Natarajan recommended that unitholders accept the offer.

CCT units edged down S$0.01 or 0.5 per cent to S$2.12; CMT units dipped S$0.02 or 0.8 per cent to S$2.57. CapitaLand, the sponsor of both Reits, fell S$0.04 or 1.0 per cent to S$3.85.

After posting a 2.9 per cent increase in Q4 distribution per unit to 1.4 Singapore cents, Keppel Reit, likely to be the sole pure-play office Reit in Singapore if the CMT-CCT merger goes through, closed flat at S$1.27.

The DBS analysts are bullish on Keppel Reit's prospects as its "long-weighted average lease expiry of 4.9 years, strong committed occupancy and the ability to sign higher than market rents are strong attributes of its portfolio".

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