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Investors still wary and STI ends flat

This article is more than 12 months old

Shanghai beats regional peers while Hong Kong and Malaysia markets retreat further

The US and China may have moved to allay concerns over their trade fight but investors preferred to take the assurance with a pinch of salt.

Yesterday, the Straits Times Index (STI) opened slightly higher where it stayed for most of the session, closing at 3,067.52, up 2.19 points or 0.1 per cent.

Markets in the Asia-Pacific, which faced sell-offs on Monday, mostly recovered with Australia, China, Japan and South Korea ending higher.

China's Shanghai Composite Index was best performer of the bunch, advancing 38.63 points or 1.4 per cent to 2,902.19, lifted by last month's encouraging industrial profits out yesterday.

Hong Kong, where protests continue to cast a shadow over the economy, closed lower, as did Malaysia.

Yesterday's relief rally is unlikely to have a lasting effect and market watchers will not be faulted for questioning whether the US or China wants a deal.

VM Markets managing partner Stephen Innes noted: "While headline ping pong is expected to continue, there remains a high degree of scepticism regarding the sincerity of (US President Donald) Trump's comments or even if the Chinese are willing to recommence negotiations."

Moreover, with a round of tariffs to be implemented by both parties next week, the case for continued demand in safe havens carries weight.

"Given the persistent nature of the US-China trade conflict, which has injected greater doses of recession fears into the markets, the overall demand for safe haven assets is expected to remain resolute," FXTM market analyst Han Tan said. "With new and heightened tariffs set to be levied on US and Chinese goods by next week, safe haven assets could yet claim more upside over the near-term."

In Singapore, trading volume stood at 1.18 billion securities, just under the daily average in the first seven months of 2019. Total turnover came to $1.24 billion, 17 per cent over the January-to-July daily average.

Across the market, decliners trumped advancers 219 to 171. The blue-chip index had 14 of 30 counters closing in the red.

Yangzijiang Shipbuilding continued its run as the STI's most active counter with 62.2 million shares traded during the session. It pared Monday's gains, finishing four cents or 4.2 per cent lower at 90.5 cents.

Since resuming trading on Aug 15, the counter has the highest average daily trading volume. Data also suggests institutional investors have been net sellers of the stock while retail investors were net buyers.

The local banks were higher. DBS Group closed eight cents or 0.3 per cent higher at $24.17; OCBC Bank gained four cents or 0.4 per cent to $10.58 and United Overseas Bank ended at $24.46, up a tick.

Trade uncertainties and low interest rates to support slowing economies remain key drivers of market sentiment, with real estate investment trusts (Reits) continuing to see interest.

"In general, we get the sense that most investors are defensive and interested in S-Reits, but sceptical of investing in off-benchmark names, except those with index inclusion (STI and FTSE Epra/Nareit) potential," Citi Research analysts wrote.

While Reit sectors are "not immune from headwinds", the analysts "believe retail is the most favourable in terms of earnings quality and growth". Macroeconomic concerns are starting to bite the industrial and office space, but landlords continue to hunt for overseas acquisitions, they added.

Citi's top Reit picks are CapitaLand Mall Trust (down three cents or 1.1 per cent to $2.60), Mapletree Industrial Trust (down three cents or 1.3 per cent at $2.25) and ESR-Reit (up $0.005 or 1.0 per cent to 51.5 cents).

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