Shares lower at midday on US worries; 3,070 support eyed

Singapore shares were slightly lower by midday on Friday as investors stayed on the sidelines due to concerns about the global economy amid fresh comments by Standard & Poor’s that it may downgrade its U.S. credit rating.

By the midday break, the Straits Times Index (STI) <.FTSTI> was down 2.00 points at 3086.70. The total value of shares traded in the morning session was $478 million, slightly lower than $486.3 million on Thursday.

Investors were staying away from taking large positions in the market ahead of stress-test results of European banks due later, local traders said.

 

“The EU bank stress test results will be published today and they may cause some volatility next week. As such, investors may feel discouraged from raising their risk exposure in light of the event risk,” said Liu Jinshu, an analyst at SIAS Research.

 

The STI is expected to trade in a tight 3,070-3,100 band in the afternoon, he added.

 

“Concerns about the EU and U.S. debt crisis have been somewhat priced in. However, the lack of a credible solution from either governments means that risk aversion will remain high for some time and positive news in other areas will continue to be discounted by the markets,” Liu said.

Shares of oil and gas services firm Ezra Holdings (EZRA.SI) plunged 7.7% to $1.37 after it reported worse-than-expected quarterly earnings, traders said.

 

Brokerages DMG & Partners and CIMB Research have cut their target prices for Ezra to $1.80 on the back of its disappointing earnings, due to lower than expected gross margins for its offshore support business and higher-than-expected interest expense.

 

However, Orchard Parade Holdings (ORCH.SI) outperformed the market and rose as much as 8.2% after it said it was in talks with Far East Organization over the possible injection of some assets into a real estate investment trust.

 

By the midday, Orchard Parade shares were 7.2% higher at $1.555 with 861,000 shares traded. This was 4.9 times its average daily turnover since the start of the year.

 

Palm oil firm Mewah International (MEWI.SI) fell 2.3% to $0.835 after Nomura cut its target price to $1.16 from $1.34 due to weak earnings growth.

 

“Our channel checks suggest operating conditions for Mewah continue to remain weak, after a muted first quarter as demand remains under pressure on expectations of crude palm oil prices falling, and uncertain macro environments in Africa and the Middle East,” said Nomura in a report.