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Singapore shares edge higher on better-than-expected growth

Local lenders led the decline in Malaysian equities

KUALA LUMPUR (Nikkei Markets) -- Singapore shares began the New Year on a positive note after fourth-quarter economic growth beat expectations and private home prices rose for a second consecutive quarter.

Malaysian equities dropped, pulling back from two-and-a-half-year highs.

Singapore's Straits Times Index advanced 0.8% to 3,430.30 on Tuesday.

The city-state's gross domestic product, powered by manufacturing, rose 3.1% in the fourth quarter, bringing growth for the full year to 3.5%. The annual expansion came in at the top of the government's most recent forecast of 3% to 3.5%, and was higher than the median estimate of 3.3% in a recent central bank survey of private sector forecasters. It was also the economy's best performance since 2014 when gross domestic product expanded by 3.6%.

"The data affirm that the recovery is broadening out. The services sector is likely to take over from the manufacturing sector as the main engine of growth in 2018," DBS Research said in a note. "We expect GDP growth to moderate to 3% in 2018 as the economy shifts from a recovery to a normalized growth path."

Singapore developers were in focus after estimates released by the Urban Redevelopment Authority showed that private home prices increased 0.7% on-quarter in the last three months of 2017. For the whole of 2017, prices rose by 1%.

CapitaLand added 0.6% and City Developments rose 1.6%. Late Friday, CapitaLand said it had entered into agreements to sell stakes in six retail mall assets in India and a property management company for S$71.5 million ($53.8 million).

KGI Securities said it is eyeing laggards on the benchmark index, including ComfortDelGro, Singapore Press Holdings, Singapore Technologies Engineering, and Singapore Telecommunications. KGI said the stocks were all trading near their 52-week lows and "downside risk is limited by their 4-5% dividend yields."

On Tuesday, Singtel added 0.8%, Singapore Press rallied by 4.2%, ComfortDelGro rose 1.5%, and ST Engineering edged higher by 0.3%.

Chip Eng Seng rose 3.6% after the construction company proposed to invest in a Ho Chi Minh City, Vietnam, real-estate project.

Sunpower Group jumped 7.9% after winning an engineering, procurement, and construction contract worth 41.50 million yuan ($6.5 million).

The FTSE Bursa Malaysia KLCI index dropped 0.8% to 1782.70, ending a three-session winning run. The index had ended 2017 on a high note, closing on Friday at its highest level since May 2015.

Kenanga Investment Bank's head of research Chan Ken Yew wrote in a note that over a longer term, the outlook of the equity market was not particularly positive. He said 2018 "may not be smooth sailing" for Malaysian markets, as he forecast flat-to-negative earnings growth in the year and upside of not more than 4% for the KLCI.

Malaysia's regional appeal to investors "remains mediocre, based on the expected price-to-earnings-to-corporate earnings growth valuation matrix," UOB Kay Hian Securities said in a note.

Lenders were the biggest contributors by points to KLCI's decline on Tuesday. Malayan Banking (Maybank) and CIMB Group Holdings, Malaysia's largest lenders by assets, slipped 1.4% and 0.6% respectively. Telecommunications service provider DiGi.Com lost 4.1%, pulling back from two-year highs.

AMMB Holdings, a midsized lender, added 1.0%. Kenanga named the stock as a "tactical play," highlighting the bank's undemanding valuations and a 4.5% dividend yield.

Outside the index, MMC dropped 2.4% after saying Friday it had received notices of assessment totaling 45.91 million ringgit ($11.32 million) from Royal Malaysian Customs.

AirAsia X, the long-haul arm of budget carrier AirAsia, advanced 7.6% after appointing Tony Fernandes as co-group chief executive. The move has sparked interest from investors who believe the AirAsia founder's increasing involvement in AirAsia X would benefit the airline, said Ahmad Maghfur Usman, an analyst at Nomura Securities.

Oil and gas service company T7 Global rose 2.4% after it secured six contracts totaling 260 million ringgit.

Media Prima, a newspaper publisher, tumbled 4.0% on concerns of a potential impairment loss in its print division.

-- Alexander Winifred and Joannah Perez

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