Shares rise at midday on China data; 3,100 cap eyed

Singapore shares gained 0.3% by the midday on Wednesday, as China’s economic growth data eased some fears over a global slowdown as well as euro zone’s debt problem and helped lift Asian equities.

China’s annual gross domestic product grew 9.5% in the second quarter, exceeding economists’ forecasts but this was still the slowest pace since the third quarter of 2009. 

“Growth slowed in China, which was a relief, as it could spell less tightening measures from the government going forward. At the same time, the better-than-expected GDP data soothed some fears of China’s economy seeing a hard-landing,” said a local trader.

 

By the midday break, the Straits Times Index (STI) <.FTSTI> was up 10.40 points at 3,087.76. The total value of shares traded in the morning session was $558.4 million, down from $655 million on Tuesday.

 

However, gains in the benchmark index were likely to be capped at 3,100 in the afternoon session, as continued concers of the euro zone’s debt woes are likely to keep investors cautious.

 

Concern has shifted to Italy, the third largest economy in the euro zone, with the second-highest debt to GDP ratio in the group, and also to Spain.

 

Fanning fears was a decision by ratings agency Moody’s to cut Ireland’s credit rating to junk status.

 

“Overall, for the big picture we are more concerned about the resolution for Europe’s debt woes. While a slow down in China was one of the concerns, the problems on the other side of the world is much harder to solve,” said Kenneth Ng, head of research at CIMB Research.

 

Ng is less bullish on the outlook for Singapore equities, as they are likely to face headwinds in the coming months due to the uncertain and volatile macro-economic environment and as governments could introduce more policies to tame housing prices.

 

Coal miner Straits Asia Resources (STRL.SI) rose as much as 3% on hopes that its earnings in the second half may be stronger than expected, traders said.

 

At the lunch break, shares of Straits Asia were 2% higher at $3.09 with over 3.2 million shares changing hands.

 

“There is some short covering in Straits Asia after its fall yesterday. Investors are also buying on expectations that its second-half earnings may surprise on the upside as it starts production at new mines,” said a local trader. 

 

Port operator Portek International (PKIL.SI) jumped more than 6% after Japanese trading house Mitsui & Co (8031.T) said it would launch a tender offer to acquire the firm. 

 

Mitsui said on Wednesday it had an agreement to acquire majority control of Portek after launching a $221 million bid for the firm.