Singapore shares close weaker in low volume, dragged down by banks

THE Straits Times Index on Thursday drifted to a 6.89 points loss at 2,884.69 in low volume of 977 million units worth S$1 billion. Excluding warrants there were 163 rises versus 222 falls and the 30 STI components contributed S$738 million or 74 per cent of total dollar turnover.

In short, it was a session devoid of redeeming features, pretty much in line with the dozens that preceded it this year.

Part of the reason for the listlessness was that Wall Street on Thursday is closed for Thanksgiving whilst adding to the quietness was weakness in Hong Kong and China.

All three banks closed weaker, though OCBC stood out with an S$0.08 loss at S$8.72 in high volume of 14.8 million. Trading in OCBC alone was worth S$129.4 million or almost 13 per cent of the whole market's business.

Nomura in its Nov 26 Singapore Banks report said it thinks 2016 should see investors' focus on Singapore banks shift to growth from asset quality as non-performing loans peak. "We expect loan growth to be modest at 5 per cent year-on-year but we think earnings could grow at 12 per cent year-on-year because of higher interest rates," said Nomura.

"We believe concerns over the Singapore banks' exposure to China and commodity are overblown. The last few quarters have shown that the risk is manageable and the credit costs are not very material...We like the Singapore banks because they have attractive valuations, a 3.5 per cent dividend yield and we estimate earnings growth of 12 per cent in 2016."

Its target prices for DBS, UOB and OCBC are S$22.60, S$27 and S$12, respectively.