SOME of the excitement which has been missing from the local stock market during the first two days of this week returned yesterday with a bang when investors bought in anticipation of an earnings-driven Wednesday rise on Wall Street. They formed this view based on developments on two fronts - a 2 per cent jump in the Hang Seng Index and a 90-point rise in the December futures contract on the Dow Jones Industrial Average. The outcome was a 40.08 points surge in the Straits Times Index to 2,708.48 that came with 2.4 billion units worth $1.9 billion traded, the highest in a week.

As brokers pointed out, many large US companies are expected to release their Q3 figures this week and next, and given the better than expected numbers reported last week by Alcoa, it was possible that investors were hoping for similar results by other American heavyweights. Lending weight to this theory was an average gain of 1.5 per cent for Europe when markets there opened in the late afternoon.

Shares of the Singapore Exchange (SGX) ended 10 cents firmer at $8.59. Ahead of the SGX reporting results for its first quarter for the financial year ending June 30, 2010 later today, Credit Suisse maintained a 'neutral' view on the stock.

'SGX now trades at 22x consensus 12-month forward PE, pricing in average daily turnover (ADT) for $1.8-2 billion . . . We believe ADT needs to sustainably exceed $2 billion for a consensus upgrade to EPS estimates,' said CS. Its rating was based on a lack of catalysts to drive volume up and no imminent gains from new products.

In a Singapore banks report yesterday, Macquarie Research said that it estimates the three banks will report a net profit of $1.18 billion for the Q3 when they release their results in a few weeks' time. It estimates loan growth of one per cent for the year to date and 2.7 per cent quarter-on-quarter, but said that there is a risk of these figures being overly optimistic if the ongoing contractions in regional loans continue.

'In the near-term, we maintain our 'neutral' view on the sector with no 'outperform' recommendations. The sector's FY10 estimated price/book (P/B) of 1.5x is near the historical mean. The lack of earnings catalysts, particularly from the net interest income perspective, suggests it is fair value for now,' said Macquarie.

In a Oct 13 report on the banks, UBS Investment Research said that the sector trades at 11.4x 2010 estimated price-earnings (PE) and 1.36x 2010 estimated P/B, about 15 per cent below the 10-year mean PE and 9 per cent below the mean P/B. 'While revenue growth is important, we believe it is equally important for provisioning to fall in an environment where asset quality remains a concern,' said UBSIR.

In its Oct 13 Singapore Strategy, Nomura touched on the withdrawal of the government's Jobs Credit Scheme which it said will be a drag on corporate earnings in 2010 because 2009's figures would have been cushioned by a cash injection of '$4.5 billion and a corporate tax cut'.

'We reiterate that with earnings growth in 2010 likely to be slow compared to past recoveries, investors should focus on companies that have the ability to produce better-than-expected EPS (earnings per share) growth for 2010 of 12 per cent (Nomura estimate). We do not expect the Q3 reporting season to produce a large lift in corporate profit expectations for 2009 or 2010,' said Nomura.