Date: July 8, 2024
- Banks propel STI above 3,400 for first time in about 2 years
- Brokers positive on the banks
- Banks now make up 45% of the STI: report
- Yoma’s shares surge 25% after profit turnaround
- Stocks from Industrial and Consumer Cyclical sectors enjoyed greatest turnover growth in the first half: SGX Research
- Wall St remained resilient; 78% chance of a rate cut in September
- STI’s first half return was 5.7%: SGX Research; banks enjoyed greatest institutional inflows
- Wall St remained resilient; 78% chance of a rate cut in September
It’s all about the banks
A sudden explosion of interest in the three banks send them rising to new highs and propelled the Straits Times Index, which had been flirting with the 3,300 level for several weeks, well past the 3,400 mark last week.
At the end of a hectic trading week for the banks, Singtel and a handful of other index components, the STI stood 78 points or 2.3% better off at 3,410.81, a two-year high. Average daily volume amounted to S$1.16b, pushed upwards by the S$1.48b done on Wednesday.
The gains, however, were not very broad-based – on Tuesday for example, when DBS and OCBC hit new all-time highs and the STI added almost one per cent in good volume of S$1.32b, there were 302 falls versus 268 rises throughout the whole market.
Of the three banks, DBS was the outstanding performer, starting the week at S$35.79, rising to an all-time closing high of S$37.98 on Thursday before ending Friday at S$37.42 for a net gain of S$1.63 or 4.6%.
OCBC started the week at S$14.43, closed Thursday at an all-time record of S$15.15 before ending the week at S$15 for a net gain of S$0.57 or 4%.
UOB started Monday at S$31.33, rose to an all-time high of S$32.57 on Thursday and ended the week at S$32.50 for a nett rise of S$1.17 or 3.7%.
Brokers positive on the banks
The Business Times on Wednesday quoted local brokers CGS International as recommending an “add’’ for UOB and OCBC with target prices of S$33.30 and S$15.40 respectively.
“UOB is our top pick in the sector as we look forward to earnings synergies to materialise from its newly-acquired Citi franchise’’ said CGS. “We believe write-backs of management overlays are unlikely Covid-19 truly blows over, the credit quality of UOB’s portfolio of loans under moratorium remains healthy. Asset quality concerns from its small- and medium-sized enterprises and Asean portfolio are also well-contained in our view’’.
Banks now make up 45% of the STI: report
Following their outperformance in the last couple of months, the local banking trio now make up around 45 per cent of the STI by market cap, with DBS comprising about a fifth of the benchmark index.
Based on data from Bloomberg, the Business Times on Thursday reported that market cap of the STI stood at S$507.6 billion as at Wednesday. DBS was at S$108 billion, OCBC at S$67.3 billion and UOB, at S$54 billion.
This increased concentration of banks on the Straits Times Index (STI) highlights the significance of the sector in Singapore, said Danny Khoo, country head of sales trading at Saxo.
“This increase also demonstrates the substantial growth these banks have experienced over the past decade, seeing that they accounted for only 22% (of the STI) in 2014,” he said.
This dominance is in contrast with other key markets in the region, where banks are not as heavily concentrated in their indices, notes Glenn Thum, senior research analyst at Phillip Securities Research.
“Banks make up about 22% of the Hang Seng Index, about 0.7% of the Nikkei 225, and about 27% of the FTSE Bursa Malaysia KLCI,” he said.
This concentration is also higher than that of major indices such as the S&P 500, noted Yeap Jun Rong, analyst at IG. “The financial sector accounts for around 13% of the S&P 500, but this includes the credit services, insurance and asset management industry as well,” he said.
Yoma’s shares surge 25% after profit turnaround
Shares of Yoma Strategic enjoyed heavy trading and large price gains after the mainboard-listed company reported strong earnings compared to a loss for the previous comparable period.
Before the market opened on Wednesday, Yoma reported US$20.9 million in net profit for the six months ended March, turning around from a US$32.7 million net loss in the corresponding period last financial year.
Revenue for the period stood at US$109.2 million, up 32.1% from US$82.7 million a year earlier, with improvements across its core businesses.
For FY2024, net profit was US$18.4 million, from a US$41.2 million net loss in FY2023, on the back of a 78.6% higher revenue at US$220.8 million.
Its core earnings before interest, taxes, depreciation and amortisation for the year increased 160.5% year on year to US$45.8 million.
Over the week, Yoma’s shares rose from S$0.123 to S$0.154, a gain of S$0.031 or 25.2%.
Stocks from Industrial and Consumer Cyclical sectors enjoyed greatest turnover growth in the first half: SGX Research
In 1H24, nearly half the stocks that saw their average daily turnover (ADT) more than triple from 2023 levels represented the Industrials and Consumer Cyclical Sectors said SGX Research in its latest Market Update.
“Industrial stocks included COSCO SHP SG, Chasen, Beng Kuang Marine, Soilbuild Construction and Wee Hur, while Consumer Cyclical stocks included Isetan and ValueMax’’ said SGX Research.
“Soilbuild Construction has seen its ADT grow 10-fold in 1H24, from 2023 levels, while the stock generated a 210% price gain. The surge in trading turnover followed the Group reporting it had clinched a S$647.5 million construction contract, bringing the Group’s order books beyond $1.2 billion for the first time’’.
SGX Research also said that Beng Kuang Marine, with a market capitalization of S$47, recorded S$2.4 million of net institutional inflow in 1H24, with a new substantial shareholder emerging, Ginko-AGT Global Growth Fund, which increased its direct interest in the stock to above 7% on 6 June.
STI’s first half return was 5.7%: SGX Research; banks enjoyed greatest institutional inflows
In an earlier Market Update, SGX Research said the STI generated a 2.9% gain to 3,332.8, with dividends boosting the total return to 5.7% in 1H24, led by the banks, YZJ Shipbuilding & Singtel.
“By Sector, the Banks booked S$594 of net institutional inflow partially offsetting the net institutional outflow for the broader stock market, led by the S-REIT Sector’’ said SGX Research.
It added that in June, Singtel led the STI stocks with an 11% gain to S$2.75 and that the stock also booked the highest net institutional inflow for the month.
“Proportionate to sector market cap, the Energy Sector saw the highest net institutional inflow in 1H24, with Dyna-Mac, Geo Energy, Mermaid Maritime, Atlantic Navigation, MTQ Corporation and Zheneng Jinjiang Environment booking the most net institutional inflow in the Sector’’ said SGX Research.
Wall St remained resilient; 78% chance of a rate cut in September
The S&P 500 (SP500) kicked off the second half of 2024 with its best weekly performance since late April on Friday. The advance was driven by labour market data that has supported the case for Federal Reserve interest rate cuts; some dovish commentary from Fed chair Jerome Powell and the minutes of the central bank’s last monetary policy meeting.
For the week, the S&P 500 added +2%, while the tech-heavy Nasdaq Composite gained +3.5% and the Dow Jones Industrial Average climbed +0.7%.
As at Friday, the probability of a September rate cut of at least 25 basis points was 78%.
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