THANKS to a surprise rise on Wall Street on Wednesday, the Straits Times Index (STI) yesterday gained 11.75 points to
3,028.96 while over in Hong Kong, the Hang Seng firmed 1.6 per cent. Europe's mixed opening, however, capped the STI's rise.
News reports attributed the push in the US market to better-than-expected earnings announced by Intel Corp as well as hopes that the US Federal Reserve might soon give the market what it wants in the shape of a third round of monetary injections.
Whatever the case, turnover here was concentrated in low-priced issues and amounted to 1.7 billion units worth $1.4 billion excluding foreign currency issues. The broad market was relatively mixed, recording 198 rises versus 154 falls excluding warrants.
Among the banks, DBS jumped 21 cents to $14.55 with 8.2 million traded. In its "neutral" call on DBS yesterday, OSK DMG said it sees no catalyst to drive DBS's shares in the short term. OSK DMG also said its financial model for DBS assumes a successful acquisition of Indonesia's Bank Danamon by Nov 1, 2012.
"With this assumption, we derived a DBS target price of $14.60, pegged to 1.15x 2012 book," said the broker. "This is a discount to the historical average of 1.32x P/B given the global economic uncertainties and the negative impact of the soft Sibor on DBS' net interest margin. However, if the acquisition cannot proceed (which is an unlikely event), our target will be a lower $14.30, which is pegged to 1.15x of a lower 2012 book (DBS' book will rise with the acquisition as goodwill increases)."
In its daily report yesterday, Macquarie Warrants said Macquarie Equities Research (MER) is currently forecasting new Singapore home sales of 16,000 units in 2012, in line with the 15,902 units in 2011 and three -year average of 15,630 units.
"MER believes that the key sales drivers remain intact, including: (1) low interest rates resulting in positive rental yield spread and negative real interest rates; (2) low unemployment rate; and (3) strong upgrader demand from locals ... MER thinks that CapitaLand is attractive, trading at a 37 per cent discount to its Revalued Net Asset Value of $4.72 and there is a potential upside of 27 per cent to MER's target price of $3.77." CapitaLand's shares yesterday added four cents at $2.96 with 6.9 million done.
In its technical assessment of the STI at the start of trading yesterday, OCBC Investment Research said it expected the index to make another attempt to retake the 3,033 level but if this failed, weakness could ensue. "Above 3,033, we peg the next hurdle at 3,050. On the downside, 3,000 remains the key support, ahead of 2,950," said the broker.
Meanwhile, in its Daily Breakfast Spread yesterday, DBS Group Research expressed scepticism that Wall Street was firm because of QE3 expectations.
"The home builders' sentiment index jumped by six points to 35 (July), housing starts jumped 7 per cent in June over May, and equity markets have recouped all their July losses," said DBS.
"What's the buzz? Anticipation of QE3? That can't be it. Bernanke made it clear earlier this week that that's coming only if the economy gets even worse than it is. The reverse then: a new understanding that QE3 isn't needed? That can't be it either: the fact that Bernanke's getting Congress into the loop means he's closer than ever to pulling that trigger. The outlook is murky - truly - but builders are building and markets are climbing. Where's Greenspan when you need him? It's a conundrum all right."