Investors turn defensive ahead of Fed cut

Asian markets were broadly higher ahead of an expected rate cut by the US Federal Reserve.

The Straits Times Index (STI) spent most of yesterday's session near neutral before eking out a 4.15 point or 0.1 per cent gain to close at 3,350.54.

"There had also been a noticeable evasion to safety trend with the defensives mostly faring better than the cyclicals," IG market strategist Pan Jingyi said.

Elsewhere in the Asia-Pacific, markets in Australia, China, Hong Kong, Japan and South Korea all closed higher.

Among them, Australia's ASX 200 gained 9.3 points or 0.3 per cent to 6,845.10, an all-time closing high for the index.

Malaysia was closed.

Yesterday, the Bank of Japan left interest rates, asset purchases and policy guidance unchanged, which surprised few. That said, additional easing measures could be taken.

In Singapore, trading volume clocked in at 1.17 billion securities, just under the daily average in the first six months of this year. Total turnover came to $1.1 billion, 4 per cent over the January-to-June daily average.

Across the broader market, decliners beat advancers 214 to 182.

Meanwhile, the blue-chip index had 11 of its 30 components closing in the red.

In a note, Citi Research wrote that demand from Asian investors in defensive yield names, like those in telecommunications, were revived due to growth uncertainties and a lower interest rate outlook.

Judging from yesterday's session, this held true. Singtel was the local market's most active counter, advancing $0.07 or 2.1 per cent to $3.37 on 47.3 million shares traded.

Citi said: "Singtel remained topical for investors, with investors noting operational improvements in India, Indonesia, Australia and Thailand."

Singtel and its Indian associate Bharti Airtel are among Citi's top telco picks.

Other defensively positioned blue chips that saw increased activity included ComfortDelGro (up $0.06 or 2.2 per cent to $2.82) and ST Engineering (up $0.02 or 0.5 per cent to $4.32).

Investors also picked up shares in supermarket operator Sheng Siong (up $0.04 or 3.6 per cent to $1.15), which plans to pay out increased dividends from a strong Q2 performance.

As more central banks take to a dovish hue, some investors here have shifted interest from local government bonds to higher-yielding plays.

Purchases of Singapore Savings Bonds fell by more than 60 per cent in July from June as the yield of 10-year government issued paper dropped from 1.93 per cent to 1.68 per cent.

CMC Markets analyst Margaret Yang told The Business Times: "This may reflect a big swing in risk appetite among retail investors, who tend to flee from low-yield bonds to high-yield investments elsewhere."

Sembcorp Marine, which posted a smaller second-quarter net loss of $8.5 million, down from $55.6 million a year ago, saw its shares sold off by investors, closing $0.07 or 4.9 per cent lower at $1.36.

With Sembmarine guiding for FY2019 losses of $74 million and shares trading at 1.3 times price-to-book, Lim & Tan Securities said in a research note to clients that there is "little reason to bottom-fish the stock for now".

Delong Holdings, which resumed trading yesterday, jumped $0.93 or 15.5 per cent to close at $6.94 after news that its chief executive has revived a $7 per share cash offer to take the company private through Best Grace Holdings.

Among STI components, bourse operator Singapore Exchange (down $0.03 or 0.4 per cent to $7.95) and national carrier Singapore Airlines (up $0.04 or 0.4 per cent to $9.72) are due to report earnings for the April to June quarter today.

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