Propelled by aviation, tourism plays, Singapore stocks soar higher; STI jumps 2.9%

AVIATION and tourism stocks in Singapore continued to show strength in afternoon trading as investors cheered news that a Covid-19 vaccine being developed by Pfizer and BioNTech was shown to be highly effective.

The Straits Times Index climbed 2.9 per cent or 76.5 points to 2,685.89 as at 2.53pm on Tuesday, with big gains coming from aviation and tourism-related stocks such as Singapore Airlines (SIA), SATS and Genting Singapore. These companies have been among the hardest hit by travel restrictions arising from the coronavirus pandemic.

Jeffrey Halley, senior market analyst at Oanda said in a note that financial markets have piled into a rotation trade, favouring cyclical value stocks.

"Regional stock markets in Asia, full of legacy industries such as banks, utilities, airlines, and property companies, but light on technology companies are set to outperform," Mr Halley said.

Shares of Singapore flag carrier SIA soared, rising 12.8 per cent or S$0.44 per share to S$3.87 as at 2.11pm. Earlier in the day, the counter had traded as high as S$4.15, more than 20 per cent above its previous close.

Meanwhile, integrated resort operator Genting Singapore also posted strong gains, rising 6.5 per cent to trade at 73.5 Singapore cents. It was one of the most heavily traded stocks on the bourse, with 73.9 million shares changing hands.

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The trio of Singapore banks also made solid advances, with DBS jumping 5 per cent to S$24.10 as at 2.10 pm. OCBC and UOB were also trading higher, up 3 per cent and 2.6 per cent respectively.

Elsewhere in the Asia-Pacific, airlines likewise shot higher. Hong Kong's Cathay Pacific Airways was up 11.6 per cent at HK$6.27 as at noon. Australia's Qantas Airways increased by 9 per cent to A$5.10, while ANA in Japan surged 15.5 per cent to 2,602 yen.

Overall, markets across the region mostly rallied on Tuesday, sustaining their gains from Monday. As at midday in Singapore, Japan's Nikkei 225 was trading 0.4 per cent higher, Hong Kong's Hang Seng Index was up 0.7 per cent and Australia's ASX 200 gained 0.8 per cent.

While investors have been optimistic about the Covid-19 vaccine developments, some analysts sounded caution over the speed of such vaccines' implementation, given that more tests are needed before the approval process, manufacturing and distribution are put in motion.

Reuters cited Tai Hui, chief Asia market strategist at JPMorgan Asset Management, as saying that the vaccine, if truly effective, "is still months away from mass deployment".

Oanda's Mr Halley also noted that travellers "will not be flying to Bali for long weekends next week, and Covid-19 will remain a genuine danger to millions for the foreseeable future".

"Still, I expect the excellent rotation trade to persist for some time to come going forward, unless the vaccine candidates start hitting an FDA (US Food and Drug Admistration) approval wall," he added.

"Only a couple will have to make it through to keep the music playing."

While earlier beaten-down stocks in the aviation and tourism sector are now seeing strong gains, previous beneficiaries of the Covid-19 pandemic, such as glove and medical supply makers as well as stay-at-home plays, were sharply down.

This is in line with trends in global markets, where stocks that had benefitted from lockdowns and work-from-home arrangements, such as Netflix and Zoom Video Communications, slumped at Monday's close in the US following the vaccine news.

Singapore-listed property developer and soon-to-be glove maker Aspen Holdings dropped four Singapore cents or 13.1 per cent to 26.5 cents as at 2.19pm. Top Glove fell S$0.21 or 7.6 per cent to S$2.57, while Medtecs International was down 12 per cent to S$1.03.