Senior Correspondent
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HEIGHTENED earnings expectations resulted in a 3.7 per cent rise in Hong Kong's Hang Seng Index yesterday, which helped lift Singapore's Straits Times Index 25.19 points to 2,456.15.
Also helping were expectations that Wall Street would enjoy a positive Monday, thanks largely to a 30- point rise in the September futures on the Dow Jones Industrial Average and a firm opening across Europe.
Brokers said sentiment was buoyed by hopes that second quarter earnings will be better than expected. This has attracted more players back into the market, as evidenced by yesterday's decent volume of 2.1 billion units worth $1.8 billion.
Blue chips that contributed to the STI's rise included Singapore Airlines (SIA), which gained 34 cents up at $13.84.
In a 'sell' on SIA dated July 16, Citi Investment Research said it expects the airline to report a Q2 operating loss that will give the market a reality check.
'A tug-of-war between a turnaround in the Singapore economy and SIA's weak fundamentals favours a well-supported SIA share price, helped by the SATS 'dividend' worth $1.65 a share,' said Citi. 'We concede that SIA will remain above book value and we re-benchmark our target to $13.30 (1.1x FY10 estimated price/book). We maintain our 'sell' ahead of June results but concede that SIA could be pulled up if the market recovery continues.'
Among telcos, M1 finished four cents higher at $1.68 yesterday. In an 'outperform' on July 16 after M1 released its Q2 results, Credit Suisse (CS) said the mobile phone operator looks attractive from a valuation viewpoint compared with its peers. 'Growth prospects are improving with the advent of the next generation network, and M1 also can undertake balance sheet initiatives, possibly in FY10,' said CS.
Deutsche Bank, however, called a 'hold' on M1. 'Results were generally in line with some positive quarter- on-quarter developments,' it said. 'However, given M1's ex-growth nature - we do not view the National Broadband Network as a panacea - we maintain our 'hold'.'
Elsewhere, Macquarie Research last week upgraded Allgreen Properties from 'neutral' to 'outperform' with a target price of $1.13. The broker also raised its FY09-10 estimated EPS for Allgreen by 11-14 per cent, due mainly to higher-than-expected sales and prices at One Devonshire. 'We like Allgreen for its mid-market exposure,' said Macquarie. 'It is well-positioned to ride the current buying momentum. We view the stock as a proxy for the Singapore residential sector.' Allgreen added two cents yesterday to $1.06.
Meanwhile, columnist Alan Abelson, in US newspaper Barron's, analysed the recent US jobs report that placed unemployment at 9.5 per cent - the highest in 26 years. 'The losses would have been worse had the Bureau of Labor Statistics' magical birth-death calculation not conjured up a mythical 185,000 jobs,' said Mr Abelson, who suggested the number of discouraged job seekers and part-timers are a better indicator of the jobs situation.
'By that gauge, June's unemployment rate weighed in at 16.5 per cent - another new high,' he said. 'And the real number of involuntarily idle workers could rise to an awesome 25 million or so.'
Mr Abelson concluded that jobs- wise at least, there is no sign of a turnaround in the US economy yet.
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