STI ends flat as factory output dives

Singapore stocks bucked the regional upward trend yesterday as negative economic data dampened hopes of a recovery, capping gains in the stock market.

The Straits Times Index closed unchanged at 3,125.81, down 0.01 point, after spending the final hour of trading teetering in and out of the red.

A dozen, or nearly half, of the index's constituents finished in the red, with the rest of the bourse faring just a little better.

Gainers barely edged out losers, with 190 stocks on higher ground compared with 185 that slid. The session was quieter than the previous day's, with 605.04 million shares worth $797.82 million changing hands.

Shares inched up 0.2 per cent at market opening, following comments from US President Donald Trump at the United Nations General Assembly that a US-China trade deal is getting "closer and closer". But they gave up gains shortly after the lunch break, resuming the afternoon session down 0.1 per cent.

This came as Singapore factory output plunged by 8 per cent year-on-year in August, extending the Republic's manufacturing decline into its fourth month. The drop was much sharper than the 0.1 per cent dip posted in July, and also far steeper than the forecast of 0.6 per cent from private economists polled by Bloomberg.

OCBC Bank head of treasury research and strategy Selena Ling said: "The September industrial production print will be critical in that it may tip the balance as to whether a technical recession eventually materialises in Q3 2019."

Hope is that the September manufacturing output does not deteriorate to a double-digit year-on-year decline, she said.

Declines on the local bourse were led by industrial stocks, with some Jardine-linked counters among the largest losers.

Jardine Matheson Holdings closed down 3.11 per cent or US$1.70 (S$2.40) at US$52.97, while Jardine Strategic Holdings finished at US$30.38, losing 2 per cent or 62 cents.

Likewise, Hong Kong-based retailer Dairy Farm shed 1.98 per cent or 13 cents to end the day at US$6.45. Protests have thrown the city into chaos for nearly four months now, and analysts at RHB Research Institute are staying cautious on Dairy Farm's earnings.

"We estimate that about 70 per cent of Dairy Farm's FY2018 operating profit was derived from Hong Kong, therefore, ongoing protests there are likely to impact retailers, especially those located in Causeway Bay near the rallying point for protests," the analysts wrote earlier this week.

But the bourse was helped by the likes of United Overseas Bank (UOB), which rallied 1.06 per cent or 27 cents to $25.65. Venture Corporation gained 0.93 per cent or 14 cents to $15.26, as one of the biggest advancers.

The Singapore banks have been actively lowering risk in their business mix with increasing focus on retail or wealth management, while largely limiting wholesale exposure to large corporates and larger small and medium-sized enterprises, said Maybank Kim Eng in a note a day earlier. They put UOB as their top pick, given its "strong track record" of managing asset quality together with exposure to high quality SMEs and wealth management.

Shares of high-tech manufacturer Venture have largely trended upwards for the past month. Earlier this month, UOB Kay Hian upgraded its call on the counter to a "buy", noting that Venture has managed to maintain a similar level of earnings in 1H 2019 versus a high base in 1H 2018.

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