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Stocks still waiting for Wall Street direction

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STI drifts to 2.5-point loss, extending Monday's correction, on Hang Seng Index's weakness

THE Straits Times Index drifted to a 2.5-point loss at 3,094.19 yesterday, extending a correction that began the day before.

The closure of Wall Street for President's Day on Monday meant the local market, like many around the world, spent most of yesterday waiting for overseas inspiration.

The weakness in the index came after Hong Kong plunged in the afternoon session, the Hang Seng eventually closing 0.8 per cent weaker. The Dow futures gained about 30 points, suggesting a firm opening for Wall Street.

Turnover amounted to 2.9 billion units worth $1.2 billion, which by this year's standards was relatively subdued. Excluding warrants, there were 202 rises versus 281 falls.

The top volume spot was occupied by digital safety firm DISA Ltd, formerly known as Equation Summit. The counter fell $0.003 or about 10 per cent to $0.026 on volume of 321.3 million.

In second spot was Noble Group, which has been in play after recent news that China's Sinochem Group may take a strategic stake in Noble.

After a large spurt last week, the stock yesterday ended unchanged at $0.23 on turnover of 116.6 million.

The STI's biggest drag came from a $0.12 or 3 per cent loss at $3.78 for palm oil firm Wilmar International that came with 18.8 million traded.

The company on Monday reported a 70 per cent jump in Q4 net profit to US$560.8 million (S$800 million).

Credit Suisse said although it thinks the momentum will continue and that Wilmar will show strong Q1 FY17 results, it is hesitant to be overly bullish as there is little visibility going forward.

We see limited impact to growth... and maintain our GDP forecast at  2.5 per cent...
Maybank Kim Eng economist

"We maintain 'neutral'. We revise up marginally our FY17/18 earnings estimates by 3-4 per cent and also roll over our target price to $3.73 from $3.10, taking into account the more vibrant China and Singapore markets."

For the banks, ratings agency Fitch Ratings in a Feb 21 Special Report noted that it had revised its sector outlook to negative in December 2016 in view of soft macroeconomic conditions that it expected to persist into 2017.

"This should continue to place some pressure on asset quality and profitability. However, the banks' solid credit profiles continue to support our 'stable outlook' on their ratings," said Fitch, adding that a further increase in credit charges would be manageable as long as oil prices do not retrace significantly, and that it expects impairment costs to remain well covered by pre-provision profitability.

In response to Monday's Government Budget, RHB said it views both Budget and Singapore's 2017 growth outlook positively.

"Overall, we expect domestic demand to stabilise while external demand improves amid rising exports. We expect Singapore's GDP (gross domestic product) to grow 2.2 per cent in 2017 versus the 2 per cent growth registered in 2016."

Maybank Kim Eng economist Chua Hak Bin said the Budget is more conservative than expected.

"There is some targeted help for marine and process and SMEs (small and medium-sized enterprises), but not broadly for most other sectors (services or manufacturing)... We see limited impact to growth, structurally or cyclically and maintain our GDP forecast at 2.5 per cent for 2017," said Dr Chua.

DBS's group head of SME Banking Joyce Tee said this was a "cautious and fiscally focused budget that seeks to balance social and economic concerns over the medium and long-term", adding that she would have liked to see more support to help relieve the high costs faced by SMEs.

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