HOPES ran high among brokers yesterday that the local stock market might finally have decoupled from Hong Kong when the Straits Times Index remained firm, rising 22.75 points to 2,862.29 even when the Hang Seng weakened to close unchanged.

Decoupling theories aside, the jump was most likely due to positioning ahead of an expected rise on Wall Street since this has always been the case when the STI rises sharply for no apparent reason.

Whatever the case, the index's firmness lent confidence to punters in the rest of the market, resulting in an advance-decline score of 301-110, excluding derivatives. Turnover was a moderate 1.65 billion units worth $1.6 billion excluding foreign currency issues.

Within the index, shares of Singapore Exchange rose seven cents to $7.72 on volume of 1.9 million. JP Morgan in an March 8 report titled 'Trading idea: buy SGX' said that the risk-reward trade-off for SGX is turning positive with volumes stabilising. 'We recommend a short term (three-four weeks) long SGX trade, with a potential near term gain of 10 per cent. A combination of revival in volumes close to Jan 10 levels and modest PE expansion from the current 20x should lead to swift stock price gains', adding that global equity funds have witnessed inflows in the past few weeks.

'We believe that stock turnover volumes and hence SGX share price is at an inflection point as these inflows have not yet translated into higher trading volumes at the exchanges. Over the next three to four weeks, we expect trading volumes to increase, as these inflows are put to work,' said JPM.

The foreign broker also issued an 'overweight' on water treatment firm Hyflux after the latter announced it had won a $43.8 million desalination contract for work on the Tembusu Seawater Desalination Plant.

'Given that the project is to be constructed in Singapore, we see a low degree of execution risks and would expect Hyflux to achieve relatively higher net margins of about 13-15 per cent. We estimate that this contract could add 3 per cent to both our FY10E/FY11E earnings estimates,' said JPM. Hyflux rose one cent to $3.48 yesterday.

Shares of Jardine-related companies have been rising sharply in recent sessions, albeit mostly in thin volume. Analysts have also been busy over the past few days issuing upgrades on the group following announcement of its results. For example, in addition to recently upgrading Jardine Matheson and Strategic, Citi Investment Research on March 6 upgraded Dairy Farm to a 'hold'.

'Since we initiated with a 'sell' rating in August 2009, the stock price is down 8 per cent . . . However, with inflation returning to Asian economies, we expect Dairy Farm to see some Ebit (earnings before interest and tax) margin improvement in 2010 and, with the stock approaching fair value, we upgrade our target price from US$5.50 to US$6.70,' said Citi. Dairy Farm yesterday closed unchanged at US$6.18 with just 76.5 lots done.

Meanwhile, Macquarie Equities Research in a March 5 report said that it is 'neutral' on another Jardine member, Hongkong Land. 'HKL has achieved strong results on its residential property developments in all three major regions wherein it operates, and its Central Grade A office portfolio to us remains one of the best in Central. However, the stock remains tied to the overall Central Grade A office. Until Central Grade A office rents begin to pick up in earnest, we think further upside to HKL's NAV (net asset value) capped in the near term, at least,' said Macquarie. HKL rose one US cent to US$4.88.