STI surges on news that Singapore may be emerging from recession
STOCKS surged strongly yesterday on news that Singapore might finally be emerging from the depths of its worst recession in decades.
Values were boosted by news that second-quarter flash estimates showed Singapore's gross domestic product had grown 20.4 per cent from the first quarter. Biggest gainers were bank and property counters, which were both badly bruised by Monday's sell-off.
The Government now expects the economy to contract by 4 per cent to 6 per cent for the full year, rather than the 6 per cent to 9 per cent contraction it previously predicted.
The improved outlook tempted investors back to the market with the benchmark Straits Times Index gaining 43.91 points, or 1.9 per cent, to 2,310.55 - recouping the losses sustained on Monday.
CIMB-GK economist Song Seng Wun, in a note to clients, said Singapore's spectacular second-quarter rebound was powered by a recovery in manufacturing, and particularly in biomedical output.
'With the fear factor diminishing, Asian exporters are starting to benefit from global inventory restocking and this will have a positive impact on manufacturing production and non-oil exports in the coming months,' he added.
Despite the second-quarter jump in activity, he warned that Singapore might still be a year or so away from a broad- based recovery, when overall labour market conditions improve and consumers in the United States and Europe start to spend again.
Given the more positive outlook, bank stocks were eagerly snapped up by investors who were influenced by Wall Street, which gained a hefty 185 points after influential banking analyst Meredith Whitney upgraded her views on investment bank Goldman Sachs and said Bank of America could provide value for investors.
DBS Group Holdings rose 32 cents to $11.74, United Overseas Bank gained 36 cents to $14.78, while OCBC Bank was up 14 cents at $6.80.
Property counters made a comeback on hopes of a brisk pickup in the residential market. City Developments rose 22 cents to $8.22, while CapitaLand gained eight cents to $3.39, and Keppel Land was up five cents to $2.09.
On the broad market, however, trading was relatively muted, despite gains made by penny and China stocks. Market volume fell below one billion shares to 915.27 million shares worth $924.69 million, with 338 gainers outpacing 120 losers.
Going forward, Merrill Lynch chief global strategist Michael Hartnett remains hopeful of a summer rally, given the liquidity still available in the market.
Institutional players, for example, were surprised to learn that cash still made up more than 20 per cent of retail investors' portfolios. He believed the biggest upward surprise to the second half could be a rally in US consumer spending and global lenders outperforming market expectations.
And, while some investors are still sceptical about the quality of the economic expansion in China, he felt there was 'still room for China growth to surprise over the medium term'.
Some traders noted that Wall Street jubilation might be premature, considering that another large US lender, CIT Group, was in financial difficulties.
Source: Straits Times, 15 July 2009
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