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STI has another 'Turnaround Tuesday', closes 5.8% higher

SINGAPORE'S Straits Times Index (STI) rebounded after its worst performance since 2008's global financial crisis (GFC) as investors took heart in the US Federal Reserve's move to adopt unlimited quantitative easing as well as further lending to US small and medium-sized enterprises (SMEs) most affected by Covid-19.

Sentiment in the region is also being propped up by a weaker US dollar. Another positive was news that Chinese authorities will lift travel restrictions for those residing in Hubei province on March 25, even as new cases in China double due to imported infections.

On Tuesday, the blue-chip index opened 3.7 per cent higher and traded in that range before advancing further after European markets opened. It closed 128.57 points or 5.8 per cent higher at 2,362.05, its best session since April 2009. In a reversal from Monday, just one - Jardine Matheson Holdings - of the STI's 30 counters closed in the red.

Elsewhere in the Asia-Pacific, equity benchmarks in Australia, China, Hong Kong, Japan, Malaysia, South Korea and Taiwan all registered gains.

Of the lot, South Korea's Kospi Index was the best performing, advancing 8.6 per cent. Meanwhile, the 7.1 per cent gain for Japan's Nikkei 225 was its largest single day jump since February 2019.

AxiCorp global chief markets strategist Stephen Innes said: "Asian equities and fixed income certainly like what they see from the Federal Reserve. No one likes the positive correlation between the two when markets are going down, but if they are going up in unison, then it's most welcomed."

That being said, the foot-dragging on the fiscal front by both the US and Europe as Covid-19 cases continue to soar, is likely to impede hopes of a sustained improvement in outlook.

Mr Innes noted that "hopefully, there is more to come at the fiscal end of the equation, which could be the ultimate game-changer the market is desperately waiting on".

In the local market, the banks staged strong recoveries. DBS jumped S$1.33 or 7.9 per cent to S$18.21, OCBC Bank gained S$0.50 or 6.4 per cent to S$8.31, while United Overseas Bank finished at S$18.80, up S$1.23 or 7 per cent. 

In a Tuesday report, UOB Kay Hian analyst Jonathan Koh said that at current levels, share prices of DBS and OCBC have factored in non-performing loan (NPL) ratios to reach 4-4.5 per cent by end-2021 due to the Covid-19 outreak. This, Mr Koh noted, is higher than during the GFC where NPL ratios for DBS was 2.9 per cent and OCBC Bank was 1.7 per cent.

Given that markets are prone to overshoot during periods of extreme volatility and uncertainty, he added the banks could continue to see sell-offs in the near future but share price troughs are "in sight".

In line with the broader market, real estate investment trusts (Reits) rebounded, with the iEdge S-Reit Index up 75.85 points or 8 per cent to 1,024.00.

The STI's Mapletree Logistics Trust leapt S$0.14 or 11.3 per cent to S$1.38 while Ascendas Reit units gained S$0.17 or 7.4 per cent to close at S$2.46.

With sentiment likely to remain choppy in the coming days, Joel Ng, KGI Securities' head of Singapore Research, cautioned that while bargains can be found among Reits, investors are best placed to "be careful as we are not out of the woods yet".

Trading volume in Singapore was 1.5 billion securities; total turnover was S$1.94 billion. Advancers trumped decliners 372 to 139.