Week kicks off with cautious start
STI closes down 0.3%, while markets finish mixed across region
Lacking catalysts, the local equities market got the week off to a cautious start - and like its regional peers, was the site for muted action.
The Straits Times Index (STI) finished at 3,311.53, down 9.87 points or 0.3 per cent.
It was mixed across the region, with markets in Australia, China, Hong Kong and Japan notching up modest gains. South Korea was flat and Malaysia closed lower.
Vanguard Markets managing partner Stephen Innes said: "We were calling for a mixed start today regardless of the Middle East brouhaha, as the market is weighed down by the uncertainty of what door to walk through."
The "doors" he referenced were: the dovish US Federal Reserve; the US-China trade war uncertainty; the Middle East crisis escalating; and the wait-and-see stance until this weekend's G-20 meeting between the US and China. Market watchers told The Business Times that sentiment in Singapore was most influenced by the first and fourth factors.
Trading volume here clocked in at 1.38 billion securities, 16 per cent above the daily average in the first five months of this year. Total turnover came to $1.01 billion, just under the January-to-May daily average.
Across the market, decliners trumped advancers 214 to 169. The STI fared better, with 12 of its 30 components ending in the red.
With expectations of Fed dovishness, investors have lately turned to buying up real estate investment trusts (Reits).
While Reits are beneficiaries of a lower interest rate environment, traders said some now have "expensive" valuations after the recent rally.
OCBC Investment Research downgraded CapitaLand Commercial Trust (CCT), which closed unchanged at $2.14, to "sell" on valuation grounds.
The research house said in a note that given the rally, its estimate for CCT's FY2019 distribution yield fell to 4.3 per cent.
A Bloomberg consensus has pegged the distribution yield at 4.2 per cent - an eight-year low.
CCT last traded at such tight valuations in terms of absolute yield in November 2007, OCBC noted.
That said, retail Reits still offer upside. Last Friday, UOB Kay Hian said such Reits, largely ignored in the past, have weathered the impact of online shopping and are seeing more contribution from tourists.
Among defensive Reit plays, UOB Kay Hian favours Frasers Centrepoint Trust (FCT), which advanced five cents or 2 per cent to $2.59 yesterday, for its focus "on necessity spending and suburban retail malls in HDB housing estates".
The brokerage has a "buy" rating on it and a target price of $2.72.
DBS Group Research sees FCT as one of the fastest growing Reits, maintaining a "buy" recommendation and raising the Reit's target price to $2.85.
KGI Securities, less bullish than its peers, re-initiated coverage on FCT with a "neutral" call and a target price of $2.33.
It noted that FCT has deepened its suburban footprint through an 18.8 per cent stake in PGIM Real Estate Asia Retail Fund - the largest non-listed retail fund in Singapore - and a one-third stake in Waterway Point.
But with 36 per cent of known supply pipeline to be constructed outside the city, KGI analyst Geraldine Wong said FCT may face competition for shopper traffic in future.
With an interest rate-friendly environment on the horizon, financials were among the laggards.
DBS Group Holdings closed 15 cents or 0.6 per cent down at $25.77; OCBC Bank dipped seven cents or 0.6 per cent to $11.28 and United Overseas Bank finished at $25.86, dropping 46 cents or 1.8 per cent.
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