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STI bucks trend as most Asian stocks fall

This article is more than 12 months old

Property and banking stocks give index a boost as Asian stocks react to US-China trade talks

Most Asian stocks pointed lower yesterday as the rally from US-China trade talk hopes faded, but Singapore stocks bucked the trend.

The Straits Times Index rose 0.81 per cent or 25.44 points to 3,183.51. Advancers outpaced decliners 229 to 146, as the bourse saw turnover of 1.3 billion shares worth $1.11 billion.

Property and banking stocks did much of the heavy lifting. CapitaLand and City Developments led gains in the property sector. CapitaLand added 2.51 per cent to $3.27, while City Developments put on 1.64 per cent to $8.70.

As for local banks, DBS Bank gained 0.83 per cent to $24.44, and United Overseas Bank rose almost 1 per cent to $25.80. The exception was OCBC Bank, which reversed the morning's gains and closed unchanged at $11.61 on the day.

Over the past month, the banks have trended in the black, and analysts are expecting them to retain their showing against a backdrop of slower macroeconomic growth this year.

CGS-CIMB analysts Andrea Choong and Lim Siew Khee are remaining overweight on the sector "on account of comfortable capitalisation and further upside of net interest margins".

They do not think Coastal Oil's liquidation is indicative of "more material deterioration" in the sector.

In the worst-case scenario, credit costs could rise by 1-6 basis points, a level which the analysts believe is not material.

OCBC remains the top pick for the sector, "due to continued net interest margin upside alongside attractive valuations".

According to CGS-CIMB, OCBC trades at 1.1 times its current year market-to-book ratio, below the long-term mean of 1.4 times.

Real estate investment trusts (Reits) also fared well yesterday, with most counters headed north after the release of minutes from the latest Federal Reserve meeting, which suggested further interest rate hikes could be on hold as the US central bankers wait for more clarity on global growth risks .

The minutes pointed to a backdrop of low inflation in the US and showed that many policymakers felt that the central bank "could afford to be patient about further policy firming". They also indicated that some Fed officials think that a "relatively limited amount" of rate hikes may be coming.

Sabana Reit gained 2.5 per cent to 41 cents, and ESR Reit was up 0.94 per cent at 53.5 cents. Ascott Reit also rose 0.91 per cent to $1.11, especially on the back of news it sold Ascott Raffles Place Singapore for $353.3 million.

Otherwise, there was not much new to cheer about, as investors took stock of US-China trade negotiations.

The Chinese Commerce Ministry issued a statement yesterday, saying the trade talks with the US were extensive and established a foundation for the resolution of each others' concerns.

China also earlier committed to buying more US agricultural goods, energy and manufactured products.

The office of US Trade Representative Robert Lighthizer said the US will decide on next steps after officials report back to Washington.

DBS Group Research analysts said while the three-day meeting was a first step towards easing tensions on both sides, there are challenges ahead.

"US demands for verification and enforceable targets on intellectual property rights, transfer of technologies and non-tariff barriers may not be that easily addressed," they wrote. "This sets up room for volatility in the lead-up to the March 1 deadline when negotiations on these issues need to be concluded."

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