Shares up at midday but NOL underperforms

Singapore shares rose by midday on Tuesday, but traders expect volatility in the market to continue in the near term as the deadlock over the U.S. debt situation persisted.

By the lunch break, the Straits Times Index (STI) <.FTSTI> was up 0.2%, or 6.26 points, at 3,177,81. The total volume of shares traded in the morning session was 755.5 million shares and turnover was $584.9 million.

This compares with the volume of 638.2 million shares and turnover of $629.3 million in Monday’s morning session. Traders said the STI is expected to trade sideways in the afternoon.

“Most people do expect the U.S. debt deal to be ironed out because they can’t be shooting themselves in the foot. It’s a matter of who gets more concessions,” said Carey Wong, an analyst at OCBC Investment Research.

“There is no major sell-off, but we also haven’t really seen long-term buying,” he said. ”A lot of people are still going into defensive stocks such as REITs, telcos and utilities so they are expecting volatility to continue for a while.”

Shares of Singapore oil rig builder Sembcorp Marine (SCMN.SI) rose as much as 2.1% on hopes for more orders and an uptrend in margins. At midday, the stock was traded at $5.44 on a volume of 1.3 million shares.

DnB NOR said Sembcorp has beaten its margin expectations for the past four quarters up to the January-March period, and the firm has secured nearly $2.2 billion of new orders year-to-date.

The bank upgraded Sembcorp stock to hold from sell and raised its target price to $5.30 from $5.00.

However, Singapore container shipping firm Neptune Orient Lines (NOL) (NEPS.SI) fell as much as 1.4%. At midday, the stock was down 0.7% at $1.44 with 3.2 million shares changing hands.

The firm posted a 5% rise in its cargo in the four weeks period to July 1 from a year ago, but weakness in Asia-Europe rates pushed its average revenue per forty-foot equivalent unit lower by 13%.

“The period saw the sharpest year-on-year decline in freight rates since end-2009. Volumes sequentially improved, but this is in line with expectations and highlights a lack of pricing discipline, in our view,” Nomura said in a report.

Nomura expects NOL, which will announce its second-quarter results on Aug 12, to report a net loss of $35 million, compared with a net loss of $10 million in the first quarter.