Stocks rise again on oil price rally

Delays in flight clearance for takeoff due to the weather outside remaining frightful might have kept the Clauses in town longer than expected. Local shares continued to advance yesterday, marking a second consecutive session of gains on the back of a crude oil recovery.

Singapore stocks ended 0.4 per cent higher, with the Straits Times Index advancing 12.54 points to 2,898.3. That left it in positive territory for the year but only by a whisker - it was 0.54 per cent up from the end of last year.

The blue-chip index was boosted after crude oil prices had rallied and Wall Street had edged up. The attention was mainly on second-liners, though. About 1.19 billion shares worth $542.4 million in total changed hands, which worked out to an average unit price of $0.46 per share, and gainers outnumbered losers at 258 to 149 or about seven up for every four down.

The higher stock prices might be viewed as a result of traders mostly expecting a year-end push that they plan to cash out on afterwards.

"There is too much hope and prayer coming from the new administration," said Phil Blancato, CEO of Ladenberg Thalmann Asset Management in New York, in a Reuters report.

"Factually, the data is fine - it is not that different than it was six months ago... profits have somewhat bounced a little bit, but we are certainly not getting an earnings lift-off here."

Brent crude prices rose to above US$56 per barrel yesterday after oil producers at the Organisation of the Petroleum Exporting Countries (Opec) agreed to cut production, sparking hope that 2017 may see more stability.

But on oil, too, analysts have sounded a note of caution for the Singapore market.

"The Opec production cut has been driving a sentiment rally. But we think that business-wise, 2017 may still not be an easy year," Maybank Kim Eng said in a note last week.

OVERSUPPLY

"The Singapore oil services sector is dominated by shipyards and OSV (offshore support vessel) owners, which is plagued by severe asset oversupply. In our view, utilisation improvements (if any) from better oil price sentiment may not be fast enough before some players run out of cash."

The brokerage added that it does not rule out "more failures of weak players as banks turn more stringent in granting new and even extending existing credit", and expects "another round of provisions when companies report FY16 results from mid-Jan to end-Feb next year, which could be an overhang on stock prices till then".

"Any asset sales by the judicial managers of Swiber and Swissco could provide price discoveries on asset values and that is likely to be below companies' expectations."

It added that it was less optimistic for rigbuilders Keppel Corp and Sembcorp Marine "as we view them as late cyclicals, with oversupplied drilling rigs and OSVs, plus competition from yards in Korea and China".

But it was positive on Ezion, suggesting the latter was among "financially strong asset owners that would be early beneficiaries from increases in oilfield activities", assuming crude oil prices stabilise next year. It has a "buy" call on the stock with a target price of $0.42 as at Dec 21.

Ezion shares climbed 3.9 per cent or 1.5 Singapore cents to close at $0.395 yesterday and the counter was among the top 10 actives on the local bourse.

The most actively traded counter was commodities trader Noble Group, which rose $0.007 to $0.169 with 121.2 million shares changing hands.

Other actives included Ezra Holdings, which rose 0.1 Singapore cent to $0.05 on 57.1 million shares changing hands, and Equation Summit Corp.

This article appears in The Business Times today. For full listings of SGX prices, go to http://btd.sg/BTmkts