8 September 2012

Singapore shares joined a regional rally to end higher Friday after European Central Bank President Mario Draghi on Thursday presented a plan to tackle Europe's debt crisis.

News that Beijing has approved greater infrastructure spending, including 25 subway and 13 highway projects since April, also boosted sentiment, helping the 30-share Straits Times Index snap a four-day losing run.

"The liquidity fairies delivered on what the markets had been crossing their fingers for over the past six weeks," Andrew Taylor, markets strategist at GFT Markets, said in a note. But "markets sort of know in the back of their mind that these band-aid solutions have only a limited shelf life and each time their effects are reduced," Mr. Taylor said, adding that if European Union leaders don't move forward on integration, "we will see the same strong sell off."

The 30-share Straits Times Index rose 0.8%, or 22.44 points, to end at 3,011.70, but still closed the week 0.5% lower. Volume rose to 1.52 billion shares from 1.08 billion shares Thursday, while gainers outnumbered decliners 324 to 128.

"It will take like one or two months for different market segments to gain confidence. The volume won't change overnight," said Liu Jinshu, deputy lead analyst at SIAS Research. "Weak volume may seem that the market is noncommittal, but given the overnight movement in the (U.S. markets), this rally may have some legs to run."

Cyclical counters, sensitive to shifts in global economic sentiment, led the gains. Commodity trader Noble Group was up 3.4% at S$1.235, while rival Olam International gained 2.7% to S$1.91.

Rigbuilder Keppel Corp. also registered gains, and was up 1.5% at S$11.15, while container shipper Neptune Orient Lines advanced 3.3% to S$1.11.

Property developers also joined the broad-based blue chip rally. CapitaLand rose 1.7% to S$3.08 and City Developments advanced 1.5% to S$11.27.

Golden Agri-Resources performed worst among just six declining STI components, dropping 4.3% to S$0.665, after the palm-oil company announced plans to raises up to US$500 million through a five-year convertible bond issuance. "We are near-term negative on this development as it could dilute our fully-diluted (earnings per share) by 4%," CIMB said in a note. "But if the group can activate earnings-enhancing (mergers and acquisitions), we will turn positive on this exercise."