SIA crash likely to dominate trade

SIA crash likely to dominate trade

SINGAPORE (Reuters): The crash of a Singapore Airlines jet in
Taiwan is likely to dominate trading early this week after the
company accepted full responsibility.

SIA fell 5.71 percent to S$16.50 on Friday, topping the
losers' list, after a Taiwan prosecutor said the Boeing 747-400,
carrying 179 passengers and crew, tried to take off from the
wrong runway.

SIA later accepted full responsibility for the crash, which
killed 81 people, saying it was pilot error that led to the first
fatal accident in the airline's 28-year history.

The stock was expected to come under renewed pressure after
the offer of $400,000 in compensation to victims' families.

SIA's prompt and larger-than-expected payout -- more than five
times the compensation as stipulated under the Warsaw Convention
-- leaves open the question of liability.

Analysts have said SIA could face personal and property damage
liability of more than $130 million but that it was adequately
insured for the aircraft and its contents.

Dealers said SIA shares could next test S$15.90, a previous
support, where the airline had actively bought back its shares.

The Straits Times Index ended 1.03 percent or 21.07 points
higher at 2,061.50 on Friday, and rose over five percent on the
week, mainly on a jump in NatSteel Ltd.

Buying momentum in the electronics sector was also expected to
continue after Nasdaq rose 5.3 percent in the week to Friday,
closing at 3,451.58 points.

Analysts said talk of company restructurings could lead
investors to focus on bank and tech stocks after NatSteel Ltd
sold its electronics assets at a huge premium.

NatSteel was set to pocket S$1.0 billion in extraordinary
gains after it sold its 33 percent stake in NatSteel Electronics
to U.S. electronics manufacturer Solectron Corp.

"The market is thinking who would be next. Obvious candidates
include PCI, Omni Industries and NatSteel Broadway," said
Theodore Teo of Prudential-Bache Securities in Hong Kong.

Teo said if NEL, Asia's largest electronics contract
manufacturer, could not remain independent, it would be difficult
for smaller companies to do so.

Kam Yoke Meng, a senior fund manager at OCBC Asset Management,
said banks could also return to investors' radar screens with
their attractive valuations and hidden values.

"Restructuring in the banking sector is still on. It can be a
merger or disposal of non-banking assets which may unlock more
shareholder value," Kam said.

The Monetary Authority of Singapore in June gave banks three
years to divest non-banking assets and to focus on the business
of banking.

Overseas Union Bank is likely to extend its rally after
confirming over the weekend it was in preliminary talks to sell a
minority stake in the bank.

OUB jumped more than 12 percent late on Friday to close at a
high of S$9.50 on market speculation of a restructuring and a
possible takeover of the bank at S$10 per share, brokers said.

United Overseas Bank could come under some pressure after its
investment arm, UOB Asia, was charged in court for allegedly
misleading the public by creating an impression of high demands
for two recent initial public offers.

Leng Seng Choon, banking analyst of Kay Hian, said Singapore
banks had over S$6.0 billion in value surpluses which had not
been realized, with over S$3.0 billion alone in OCBC.

In terms of valuation, analysts said bank stocks were not
expensive at their current levels and traded at below historical
average of more than two times their book value.