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Equities

Singapore, Malaysia stocks rise to two-year highs

U.S. factory data, Nikkei 225's jump buoy investors

KUALA LUMPUR (Nikkei Markets) -- Singapore and Malaysia stocks rose to more-than-two-year highs on Thursday, as upbeat U.S. factory activity data boosted appetite for risk assets.

Singapore's Straits Times Index advanced 1.1% to 3,501.16 and the FTSE Bursa Malaysia KLCI index added 0.6% to 1,803.45. Both the gauges are at their highest since May 2015.

Another day of gains for both the Southeast Asian nations came after U.S. indexes hit record highs overnight after robust manufacturing and construction activity data. The Institute of Supply Management's index of manufacturing activity surged in December, underpinning expectations of buoyant growth in the world's largest economy. Separately, a report showed that construction spending rose to an all-time high in November. Also boosting sentiment for Asian bourses was the 3.3% jump in Japan's benchmark gauge as markets in Asia's second-largest economy reopened after the long New Year break.

Investors got a glimpse of the U.S. Federal Reserve's views on the economy and inflation from the December meeting minutes released on Wednesday. The Fed acknowledged that labor market conditions continued to strengthen and the U.S. economy was chugging along at a healthy pace. Low inflation remained a concern with the Fed saying that developments on that front need to be monitored closely.

For the Singapore gauge, DBS Group Research analyst Joanne Goh said valuations do not look stretched currently, and the index could attempt to hit 3,688 by end-2018.

"We believe the global recovery, a weak U.S. dollar, and low bond yields are supportive of fund flows into Singapore," she said, adding DBS favors banks, property, consumer goods, as well as the offshore and marine sector, to ride a broad-based recovery.

Out of the 30 stocks on the STI, 24 ended higher and 3 closed unchanged. Heavyweight DBS Group Holdings advanced 2.4%, pacing a rally in lenders. CapitaLand, up 1.4%, led property developers higher.

Crude oil-related stocks were in focus after Brent crude prices rallied overnight to highest since May 2015. Rig-builder Keppel Corp. added 1.7%, offshore oil explorer Rex International advanced 5.3%, and KrisEnergy, an upstream oil company, added 1.9%.

Contract manufacturer Venture Corporation, scheduled to replace Global Logistic Properties on the Straits Times Index from Jan. 5, dipped 0.5%. The shares had rallied over 7% over the previous two sessions.

Perennial Real Estate Holdings, which signed a deal to invest in healthcare integrated mixed-use developments in China, closed 1.7% higher.

In Malaysia, surging foreign inflows added to the positive sentiment. International inflows into Malaysian markets totaled 469 million ringgit ($116.90 million) in the first two trading sessions of 2018, up almost eightfold from last week.

"Based on previous trends, foreign fund inflows are expected to continue for the next two to three months, in the run-up to Malaysia's general election," said Pong Teng Siew, director at Inter-Pacific Securities.

Some analysts expect stocks in Southeast Asia's third-largest economy to rally prior to Malaysia's national elections, which must be called before August. A stronger result for the ruling coalition Barisan Nasional could ensure continued progress on Prime Minister Najib Razak's billion-ringgit infrastructure projects and economic reform agenda.

The day's top performer was conglomerate Sime Darby, up 11.2%. In other movers, palm oil majors IOI and Hap Seng Consolidated added 1.6% and 0.1% on expectations of increased exports.

Sime Darby Plantations rose 0.9%. In a note to clients, PublicInvestment Bank said that the company had option deals to sell land to Sime Darby Property, which could fetch as much as 4.5 billion ringgit ($1.12 billion).

Outside the index, Westports Holdings fell 0.5% after TA Securities and UOB Kay Hian analysts downgraded the port operator, flagging higher-than-expected tax rate and a decline in transshipment volumes.

Serba Dinamik Holdings, an oil and gas services company, jumped 5.4% after Kenanga Investment Bank named the stock as one of its preferred picks within the sector citing its superior return-on-equity, a projected 22% growth in core net profit for 2017, and dividend yields.

Property developer LBS Bina Group rose 3.4% after Managing Director Lim Hock San said the company will target to sell 1.8 billion ringgit of properties this year.

HIL Industries jumped 12.5% after Executive Chairman Ng Thian Hock said Wednesday the company plans to launch at least 410 million ringgit worth of projects over the next six years as part of its broader plan to expand property business and cut reliance on manufacturing segment.

State-controlled company TDM rose 8.7% after it said it accepted land granted by Terengganu State Government, which will boost its land bank to 47,830 hectares from 31,848 hectares.

Selangor Dredging, a real-estate company, jumped 11.32% to a three-year high after announcing plans to pay a special dividend of 0.19 ringgit per share for the 2018 fiscal year.

--Alexander Winifred and Joannah Perez

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