Singapore shares close lower on weakness in oil, HK and Dow futures

A SLIP in the price of oil, softness in the Dow futures and a one per cent drop in the Hang Seng Index led to a 30.79 points or 1.2 per cent loss for the Straits Times Index to 2,613.79 on Wednesday as it gave back some of the 100 points it had gained on Monday and Tuesday.

However, the index did manage to stabilise in the late afternoon after Europe opened in the black and the Dow futures trimmed its earlier losses.

Turnover remained elevated at 972 million units worth S$1.3 billion and excluding warrants there were 135 rises versus 225 falls.

UOB was among the day's larger losers, plunging S$0.61 or 3.4 per cent to S$17.20 on heavy volume of 9.5 million.

Macquarie Warrants (MW) said in its daily report that after UOB's weak operating trends, disappointing balance sheet trends and an uninspiring outlook for the next 12 months that Macquarie Equities Research (MER) has downgraded the stock to "Neutral" from "Outperform" with a cut in target price to S$17.50 from S$20.00.

"The three key reasons for the downgrade relate to MER's expectation of: (i) negative operating leverage, due to strong cost inflation; (ii) further asset quality headwinds; and, (iii) deterioration in capital ratios and further risk-weighted assets (RWA) inflation ahead," said MW.

OCBC Investment Research on the other hand, said with the recent selldown in regional markets and the lower valuations for regional banks, which are trading at around 0.9x book and 9x earnings, it has lowered the valuation peg for UOB and dropped its fair value estimate from S$21.65 to S$20.15 but is maintaining a "buy" recommendation.