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Singapore shares drop 0.3% on Monday amid cautious trading session in Asia

LACKING catalysts, the local equities market got the week off to a cautious start - and like its regional peers, saw muted market action.

Singapore's Straits Times Index (STI) finished at 3,311.53, down 9.87 points or 0.3 per cent.

It was mixed across the region. Markets in Australia, China, Hong Kong and Japan notched up modest gains. South Korea was flat and Malaysia closed lower.

"We were calling for a mixed start today regardless of the Middle East brouhaha as the market is weighted down by the uncertainty of what door to walk through," Vanguard Markets' managing partner Stephen Innes remarked.

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The "doors" in question are: 1) the dovish US Federal Reserve, 2) trade war uncertainty, 3) Middle Mast escalation and 4) the wait-and-see approach until the G-20 meeting between the US and China.

In Singapore, trading volume on the local bourse clocked in at 1.38 billion securities, 16 per cent over the daily average in the first five months of 2019. Total turnover came to S$1.01 billion, 97 per cent of the January-to-May daily average. 

Across the market, decliners trumped advancers 214 to 169. The STI fared better, with 12 of its 30 components ending in the red.

Following expectations of Fed dovishness, investors turned to buying up real estate investment trusts (Reits) in Singapore. While Reits are among the main beneficiaries of a lower interest rate environment, traders noted that due to the rally, a number of them have now reached "expensive" valuations. 

OCBC Investment Research downgraded CapitaLand Commercial Trust (CCT) to "sell" on valuation grounds. 

The research house said in a Monday note that given the rally, its estimate for CCT's FY2019 distribution yield compressed to 4.3 per cent. Meanwhile, the figure stood at 4.2 per cent according to a Bloomberg blended forward 12-month consensus.

The Bloomberg consensus figure is the lowest over an eight-year period, and "we would have to go all the way back to November 2007 when CCT last traded at such tight valuations in terms of absolute yield," OCBC said. CCT closed unchanged at S$2.14.

Meanwhile, Frasers Centrepoint Trust units advanced S$0.05 or 2 per cent up to S$2.59.

KGI Securities re-initiated coverage on the Reit with a "neutral" recommendation and a target price of S$2.33. It is less bullish on FCT's outlook compared to peers.

The brokerage noted that FCT has deepened its suburban footprint through a recent 18.8 per cent stake in PGIM Real Estate Asia Retail Fund - the largest non-listed retail fund in Singapore - and acquiring a one-third stake in Waterway Point.

Bearing in mind that about 36 per cent of known supply pipeline will be constructed outside of city central in the future, KGI analyst Geraldine Wong said that FCT might face competition for shopper traffic in the future.

On 30.3 million shares traded, Singtel was the benchmark index's most traded stock on Monday. The telco edged up one Singapore cent or 0.3 per cent to S$3.45.

Financials were lower. DBS Group Holdings closed S$0.15 or 0.6 per cent down at S$25.77, OCBC Bank dipped S$0.07 or 0.6 per cent to S$11.28 while United Overseas Bank (UOB) finished at S$25.86, dropping S$0.46 or 1.8 per cent.