Senior Correspondent
Bookmark & Share
A REBOUND in property stocks and a spillover of volatility from Hong Kong were the main features of trading yesterday in an overall firm session that ended with the Straits Times Index (STI) gaining 47.84 points or 2.1 per cent to 2,307.61.
European markets opened firm across the board and the September futures on the Dow Jones Industrial Average was up 50 points at 5pm, suggesting the bounce here was also driven by programme trades betting on Wall Street rising on Thursday.
Although the STI benefited from a bounce in the property segment, it gained more from rises in SingTel, OCBC and Jardine Matheson, which together added 22 points.
Rises by property heavyweights CapitaLand and City Developments - which came after the government clarified that it is not looking to introduce a property gains tax - added eight points. The sector came under severe pressure on Wednesday after a news report that suggested a change in tax laws was being considered.
Reports of relevance issued yesterday included an 'overweight' on the local market by Credit Suisse (CS), on the basis that the results season could drive earnings upgrades.
'Given that the labour market has held up much better than previously expected, domestic demand could surprise positively, in our view,' CS said. 'For the banks, we have started to see consensus upgrades and expect the trend to continue.'
Noting that bankruptcies have been much lower than in previous recessions, CS also said it is 'overweight' on banks, property, finance, media and transport and 'underweight' on telecoms and capital goods.
DMG & Partners, on the other hand, said it is 'neutral' on the banking sector. 'Bank share prices have risen sharply since the March lows, and this has factored in a strong V-shaped economic recovery,' DMG said. 'Current indicators however, do not suggest the economic recovery will be V-shaped. We expect banks to make sharply higher 2009 provisions.'
DMG also said DBS is most vulnerable to the weak manufacturing sector, and it sees loan growth remaining muted for a few more quarters yet.
On the tech sector, Citi Investment Research, in a July 8 report, called a 'sell' on Chartered Semiconductor despite the company revising its Q2 guidance marginally upwards.
'Our regional foundry analyst Andrew Lu believes a mid-cycle correction will begin in Q4 09-Q1 10 which could be minus 10 per cent, higher than the consensus expectation of a 5-10 per cent quarter-on-quarter sales decline,' Citi said.
'In such a scenario, Chartered's losses would deepen and price appreciations would be capped.' Citi has a $1.20 target price based on the recent upgraded guidance. The stock lost three cents to $1.95 yesterday.
Elsewhere, a stock that was in the news recently but appears to have dropped out of play for now, is water treatment firm Hyflux, which added one cent to $2.11 yesterday. The stock traded at $2.25 a little over a week ago after news that Hyflux had signed a memorandum of understanding to build two desalination plants in Libya.
Maintaining a 'neutral' call on Hyflux, Nomura said the company's fast-growing gearing could counter future growth. Nomura set a target price of $1.95.
Search Property News
