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Nikkei Markets

Singapore, Malaysia shares rise on strong US earnings

STI ended May with 5.4% gain, while the KLCI added 0.4%

KUALA LUMPUR (Nikkei Markets) -- Singapore and Malaysia shares rose Monday as investors in Asia drew comfort from robust U.S. corporate earnings and easing geopolitical tensions in the Korean peninsula.

The Straits Times Index climbed 1% to close at 3,613.93, while the FBM KLCI ended 0.4% higher at 1,870.37. In Singapore, real estate and finance stocks rose, while industrial and gaming shares gained in its neighboring market. Both Malaysia and Singapore markets will be closed on Tuesday.

"Things to watch will be the Fed and rising interest rates especially in the U.S. as this is one of the factors affecting risk appetite for emerging markets right now," said Joanne Goh, regional equity strategist at DBS Bank.

To date, more than half of the companies in the S&P 500 have released financial results for the first quarter and 79% of the reported earnings came in better-than-expected compared to the five-year average, according to FactSet.

Equity benchmarks in the rest of Asia also climbed on the final day of April as risk appetite improved after South and North Korean leaders' summit. South Korean officials on Sunday said that the North had promised to close its nuclear test site in May.

Optimism ahead of a visit this week to China by U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer also helped bolster sentiment. The STI ended May with 5.4% gain, while the KLCI was up 0.4% by end of the month.

Apart from interest rates, investors should watch out for any escalation in trade wars and newsflow in the technology sector, said CMC Markets Sales Trader Oriano Lizza.

"Seasonally, markets live by 'sell in May and go away', suggesting a downturn is around the corner," said Lizza. The STI will continue to "ride the momentum but... as local markets tend to be driven by Wall Street, some knock-on effect is imminent," he said.

DBS closed 2.8% higher after reporting a 26% on-year rise in first-quarter net profit to a record $1.52 billion Singapore dollars ($1.15 billion) as loans grew and net interest margin rose. Smaller rivals Oversea-Chinese Banking Corp and United Overseas Bank added 1.1% and 2.4% respectively.

Raffles Medical Group slid 2.6% on Monday after reporting a 1.7% rise in first-quarter net profit to S$15.812 million on revenue of S$120.2 million, up 4.6%.

Keppel Corp lost 0.5%. On Sunday, it said it had signed a non-binding deal with Philippine property group Filinvest Development to develop solutions for sustainable urbanisation in the country.

Investors were more cautious in Malaysia as Prime Minister Najib Razak and his National Front coalition kick off their toughest campaign yet ahead of the May 9 national elections. Najib is favored to retain power despite resurgent opposition led by his mentor-turned rival Mahathir Mohamed.

"A victory for Najib would probably lead to a short-term fiscal boost for the economy," Capital Economics said in a Monday note. "However, the election will do nothing to solve the institutional problems that are holding back Malaysia's economy, and could even make things worse."

Lotte Chemical Titan Holding plunged 8.4% after the petrochemical company reported a 28.6% drop in first-quarter net profit due to lower margins and foreign exchange losses.

AEON Credit Service (M) rose 2% after earnings came in above market expectations. The financial services firm reported a 2.8% rise in fourth-quarter net profit boosted by higher credit recoveries.

Oil-and-gas prices retreated from over three-year highs, as reports of increased U.S. rig activity pointed toward higher production levels. Sapura Energy, Hibiscus Petroleum and UMW Oil & Gas Corp. fell 5.2%, 4.4% and 1.8% respectively.

--Joannah Perez and Alexander Winifred

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