Shares higher at midday on banks but limited upside

Singapore shares rose at midday on Friday, with banks outperforming the broader market, as overall sentiment was boosted by U.S. data showing factory activity had accelerated in June as well as a temporary solution to Greece’s debt woes.

By the lunch break, the Straits Times Index (STI) <.FTSTI> was up 0.6%, or 18.68 points, at 3,139.12. The total value of shares traded <.AD.SI> in the morning session was $557.1 million, compared with $1.4 billion on Thursday.

Local traders said there is limited upside in the afternoon and the cap may be around 3,150 points.

 

DBS Bank (DBSM.SI) rose 0.95%, United Overseas Bank (UOBH.SI) gained 0.61% and Oversea-Chinese Banking Corp (OCBC.SI) advanced 1.07%.

 

Total bank lending in Singapore rose 3.5% to $363.3 billion in May from $351.1 billion in April, boosted by a jump in lending to manufacturers, central bank data showed on Thursday.

 

Kim Eng also said in a report that the new banking rules announced by the Monetary Authority of Singapore are more benign than expected and all three local banks can meet the requirements comfortably.

 

The brokerage added that DBS, UOB and OCBC are among the most capitalised in Asia, with Core Tier 1 ratios of 11.5% to 13%.

 

“The Singapore banks have capital adequacy ratios that are at the top end of the spectrum in Asia and also globally. They are seen as well-capitalised,” said Derek Ovington, an analyst at CLSA Asia Pacific Markets.

 

“The positive is that investors now have some certainty around the regulatory framework and the banks can also plan out their capital management over the next few years with a bit more clarity,” he added.

 

Shares of CitySpring Infrastructure Trust (CITY.SI) fell as much as 5.6% after announcing a rights issue to raise about $210 million ($170.4 million) in gross proceeds to strengthen its balance sheet.

 

At midday, CitySpring was traded at $0.505 on a volume of 5.7 units.