Local index falls as trading slows ahead of long weekend

WHEN traders have the prospect of a long weekend in front of them, not even a pro-business Budget can keep them on the job.

Skipping out early was the game plan yesterday and the market showed the indifference with volume dipping to 1.65 billion shares, a far cry from the two billion-plus that has become the norm of late.

The value traded was down to $1.78 billion with the 357 losers pipping 328 gainers.

It did give the Straits Times Index (STI) a breather after investors welcomed the corporate tax cuts on Budget Day to send the market rocketing 70.28 points to a record 3,252.49.

The STI was more sedate yesterday with a 15.56-point decline to 3,236.93 although it still ended the week higher, as it had done for the past four weeks.

Pine Agritech was the most active, rising three cents to 71 cents on a volume of 51.5 million shares.

FirstLink Investments, which rose 23.5 per cent or two cents to 10.5 cents on a volume of 41.1 million shares, was the runner-up.

Some recent initial public offerings struggled in the quieter market.

Singapore electronics manufacturer Kinergy, which listed on Thursday, fell back from its first day close of 63 cents to 52.5 cents.

China Farm Equipment and construction player KSH Holdings have also fallen from first-day highs.

Some of the blue chips gained, thanks to optimism that the tax cut will boost their bottom lines.

DBS Group Holdings closed 10 cents up at $23 on a volume of 7.6 million shares.

It announced profits of $2.18 billion for the full year on Thursday, up from $1.65 billion previously.

OCBC Investment Research calculated that local banks will benefit from the 2 percentage point tax cut as a lot of their profits still come from their Singapore operations.

DBS, for example, derived about 65 per cent of pre-tax earnings from Singapore last year.

United Overseas Bank earned 78 per cent of its earnings locally. It rose 20 cents to $20.90 yesterday.

CapitaLand rose 10 cents to $7.50, still buoyant from its $1 billion-plus profit report earlier this week.

But OCBC Investment Research indicated that many China stocks are unlikely to benefit from the tax cuts because the bulk of their revenue is derived from China. But some will enjoy preferential rates.

DBS Vickers Securities totted up the gains from the tax cut and found that net profits for corporate Singapore will rise 2.49 per cent this year.

Companies with huge tax bills and earnings from Singapore operations, including the telcos, property and industrial companies, appear best placed to benefit.

'Overall, we believe that the 2007 Budget brings cheer for the stock market, with positive changes for the economy,' said DBS Vickers Securities.

It expects CapitaLand, Allgreen, Keppel Land, Singapore Land, ComfortDelgro and Singapore Airlines to be among the big winners.

sushyan@sph.com.sg