All eyes on Q2 corporate reports

A STELLAR American job report helped push the Dow Jones Industrial Average to a strong finish on Friday, which could put local investors in a buying mood today.

However, analysts say local stocks would be given a real boost if there are also signs that local corporate earnings are improving.

This week, the second-quarter earnings season begins, with companies including Singapore Press Holdings and telco M1 set to report on Friday.

SPH will release its third- quarter results while M1 will release its second-quarter and half-year results after the market closes on Friday.

Market participants are watching for a possible impact on M1's earnings from new telco operator Circles.Life, a consumer brand of Liberty Wireless, which leases bandwidth from M1 at wholesale rates.

"M1's earnings may surprise on the upside, assuming Circles.Life is able to poach customers from other telcos," said remisier Alvin Yong.

Despite a weaker profit outlook, UOB KayHian said SPH's dividend yield is expected to remain relatively stable at 5 per cent all the way through 2018.

This presents "an attractive yield proposition in the continued low interest rate environment", it added.

The brokerage, which has maintained a "hold" call on SPH, noted in a report last month that total ad page growth could slow to 0.6 per cent in the third quarter this year due to a sharper-than-expected fall in recruitment and display ads, mitigated by higher classified ads growth.

While tourist arrivals picked up, led by a resurgence in Chinese tourists, a stronger Singapore dollar and the corruption clampdown in China saw tourist spending fall 7.6 per cent last year from a year ago. Retailers were affected and adspend likely fell, UOB noted.

Investors are also likely awaiting the release of bank results, with OCBC Bank and United Overseas Bank due to release their second-quarter and first-half earnings on July 28 before the market opens.

RHB Securities Research, which maintained a neutral call on OCBC, said in a report on Friday that it expects the bank's net interest margins to stay stable as the United States federal funds rate is expected to rise at a slower rate due to Brexit, and the Singapore Interbank Offered Rate (Sibor) may stay flat for a longer period.

gleong@sph.com.sg


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