Singapore Stocks Fall, Led by Banks as JPMorgan Cuts Estimates

By Jean Chua and Shiyin Chen

Oct. 28 (Bloomberg) -- Singapore stocks fell for a fifth day, driving the benchmark index to its lowest level in more than five years, on concern a recession in the island will erode corporate earnings.

United Overseas Bank Ltd., the city's largest lender by market value, declined 7.3 percent, set for its lowest close since May 2003 after JPMorgan Chase & Co. cut estimates for banks' earnings for the next two years. Oversea-Chinese Banking Corp., the second-biggest lender, fell 5.1 percent.

``Banks are likely to come out with further provisioning for collateralized debt obligations and loans,'' said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion. ``We'll start to see the impact of the real economy affecting asset quality.''

The Straits Times Index lost 95.78, or 6 percent, to 1,504.50 as of 12:35 p.m. local time, having fallen as much as 8 percent. The benchmark is on track for its lowest level since Aug. 6, 2003. All but four of the index's 30 stocks fell. The Singapore market was closed yesterday for a public holiday, when MSCI's Asia Pacific index slumped 6.5 percent.

Singapore went into a recession in the third quarter as the global financial crisis hurt economic growth, reducing demand for the city-state's exports. The government slashed its estimates for gross domestic product growth for the year to 3 percent.

United Overseas

United Overseas fell 7.3 percent to S$11.20 and Oversea- Chinese Banking declined 5.1 percent to S$4.63. United Overseas may report a profit of S$413 million ($273 million) for the third quarter of the year, 13 percent lower than the previous estimate of S$472 million, JPMorgan analysts Harsh Wardhan Modi and Suni Garg said in the report today.

The revisions factor in higher credit costs, lower non- interest income, slower loan growth and higher provisions for other losses, ``partially'' offset by marginally higher net interest margins, Modi and Garg said.

``The macro environment in the region is the toughest since the Asian crisis,'' the analysts said. ``Banks are cheaper today than in 1998, based on adjusted price to book.''

DBS Group Holdings Ltd., the third-largest, declined 9.2 percent to S$9.12. Singapore bank stocks have lost 20 percent of their value over the past week, JPMorgan said in a note today.

They slashed their price targets for United Overseas to $20 from S$23, that for DBS to S$20 from S$25, and for Oversea- Chinese to S$6.50 from S$8.

Noble Group Ltd., a Hong Kong-based supplier of raw materials, gained after the company reiterated it will report a record quarterly profit and as falling commodity prices cut its working capital requirements.

`On Track'

Noble, which more than doubled second-quarter profit, was the index's biggest gainer. It rose 5 Singapore cents, or 11 percent, to 52 cents.

``Noble is on track to achieve a year of record earnings and could well surpass our $455.4 million net profit target,'' Lee Wen Ching, an analyst at OCBC Investment Research Pte in Singapore, said in a report published today. OCBC Investment maintained its ``buy'' rating on the stock and its S$2.53 fair value estimate.

Creative Technology Ltd., a maker of accessories for Apple Inc.'s iPod, fell to a record low in Singapore trading after the company posted its biggest loss in 10 quarters as demand for its own music players slumped. Creative fell 13 percent to S$2.62.

Lasseters International Holdings Ltd., a Singapore-based operator of online casinos, fell 15 percent to a record low of 11 cents after it said it stopped taking bets on its gaming businesses and is in talks with its parent company for more financial support.

The ability of the online casino to ``turn around is very remote, despite continuous support from the parent company over the last two years,'' the company said on its Web site.

To contact the reporter on this story: Jean Chua in Singapore at jchua4@bloomberg.net; Chen Shiyin in Singapore at schen37@bloomberg.net