Morgan Stanley to hire more bankers in Japan as rivals loom

Morgan Stanley's Japanese investment-banking joint venture plans to hire more bankers this year to compete with Nomura Holdings Inc and defend its three-year grip on mergers advice in the country. 

PHOTO: REUTERS

FEB 8, 20164:44 PM

[TOKYO] Morgan Stanley's Japanese investment-banking joint venture plans to hire more bankers this year to compete with Nomura Holdings Inc and defend its three-year grip on mergers advice in the country.

The US bank and Mitsubishi UFJ Financial Group Inc.agreed to increase staff at their securities firm, including people to cover industries and advise on takeovers, Deputy President Haruo Nakamura said in an interview last month, without giving numbers. The joint venture already added 60 bankers over the past two years to about 460, according to Nakamura.

"It won't be easy for us to sustain our position because the competition with other megabanks and foreign banks is intensifying," said Nakamura, head of investment banking at Mitsubishi UFJ Morgan Stanley Securities Co. "Clients have a perception that Nomura is stable because of its large workforce."

Morgan Stanley and MUFG have been gaining market share in Japanese investment banking since they formed two joint ventures five years ago. They trailed only Nomura among underwriters of equity offerings in the country last year while topping the rankings for managing bond sales and M&A advice at a time when more companies are pursuing takeovers to cope with a slowing economy.

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Nakamura said the pipeline for mergers and acquisitions involving Japanese firms has risen as much as 30 per cent this year. Larger deals - those that exceed US$1 billion - will increase because more companies are seeking acquisitions abroad as well as consolidating at home, he said.

The venture stems from MUFG's US$9 billion investment in Morgan Stanley during the global financial crisis. The Japanese bank remains the largest shareholder in the US firm with a 22 per cent stake.

The hiring plans contrast with cutbacks in investment banking elsewhere in the world, particularly at European firms such as Barclays Plc and Deutsche Bank AGas they grapple with stricter capital rules and a trading slump.

Morgan Stanley was the second-ranked adviser on global mergers last year, trailing only Goldman Sachs Group Inc to capitalize on a rise in takeovers. Its Japanese venture advised on deals valued at US$71.8 billion in 2015, topping the rankings for a third straight year, according to data compiled by Bloomberg. Nomura was second, followed by Sumitomo Mitsui Financial Group Inc. and Bank of America Corp, the data show.

Nomura has a "decent number" of M&A deals in the works, Shigesuke Kashiwagi, the chief financial officer of Japan's biggest brokerage, told analysts on a conference call on Feb 2. The firm doesn't disclose staff numbers of its investment- banking divisions.

In equity underwriting, Morgan Stanley and Nomura were both joint global coordinators for the 1.4 trillion-yen (US$12 billion) three-pronged initial public offering of Japan Post Group last year. They were also selected to manage an IPO for Kyushu Railway Co, which may take place as soon as the year starting April.

Mitsubishi UFJ Morgan Stanley employed 5,170 people as of December, a 9 per cent increase from two years earlier. By comparison, Nomura had 16,282 staff members in Japan, little changed over the same period.

"Nomura is a giant in Japan in the sense that it has many salesmen and client assets and wider corporate ties," Nakamura said. "We'll boost headcount because our two owners both want us to enhance our presence. They have high expectations."

BLOOMBERG

      

Sheltered from biggest risks, green fuel to ride out oil crash

FEB 9, 201612:26 AM

[PARIS] Green power is cheap enough to compete with fossil fuels and will buck the trend of falling investment in oil and gas as it can offer long-term returns sheltered from political risk, investors and industry analysts say.

Oil prices have dropped by around 75 per cent since mid-2014, leading the International Energy Agency (IEA) to predict a second successive year of falling hydrocarbon investment, marking the most sustained decline since the 1980s.

In the last boom-bust cycle of 2008-2009, a crash squeezed all energy capital expenditure as power generators turned to cheap fossil fuel, which rebounded swiftly.

The differences this time include the depth of uncertainty over any oil price recovery following the US shale revolution and a rift in the Opec oil producers' club that makes agreement on output cuts to remove oversupply tougher than usual.

Last December's Paris Agreement on climate change, meanwhile, is the first truly global deal, bringing in China and the United States. The accord is vague and has yet to be ratified but its very existence emboldens investors to move away from hydrocarbon fuel.

"Fossil fuel technologies no matter how efficient will face greater and significant challenges," Hendrik Bourgeois, vice president European affairs at General Electric, said in Brussels on Monday.

David King, Britain's special representative for climate change, said the flurry of renewable deals on the sidelines of the Paris conference, could have created "a self-accelerating process". "We are talking about the world's biggest (new) market, it puts laptops into the shade. This (renewable energy) market is going to be by 2020 between US$2ans US$3 trillion a year," he said.

Pension funds, looking to the very long term, say the smart money is shifting from oil and gas.

Representing the public sector, the largest multilateral lender the European Investment Bank, whose loans seek to underpin European Union policy, in January announced it lent record amounts for climate-related projects in 2015 and predicted the trend would continue.

COMPETITION WITH GAS The gas lobby is pushing for natural gas, which is half as polluting as coal, to have a central role in a transition to the low-carbon economy the Paris Agreement promotes, but analysts say renewables can compete.

Improved technology means onshore wind is often the cheapest energy, with costs as low as 4 US cents per kilowatt hour (kWh), although offshore is still expensive at 10-22 cents kWh, the International Renewable Energy Agency (IRENA) said.

Natural gas generation can be below 4 cents in nations such as Russia, where gas is very cheap. Elsewhere, it costs up to 8 cents to generate power from pipeline gas and up to 14 cents from liquefied natural gas.

While oil and gas expenditure fell 20 percent last year, renewable investment rose, even as upfront capital costs - the only significant expenditure given wind and solar is free - keep falling.

New renewable energy investment in 2015 rose to US$280 billion, up from US$270 billion in 2014, IRENA said, adding the growth would continue.

Some energy majors, groaning under increased exploration costs for ageing fields as well as crashing oil prices, also grasp the logic of diversifying.

Total has pledged to invest $500 million per year in new forms of energy and has set up a $150 million venture fund to invest in renewable start-ups.

Renewables make up only 3 per cent of Total's portfolio - a share expected to reach 10 per cent by 2030.

REUTER
S

Oil plunge threatens schools, other services in US producer states

FEB 9, 201612:11 AM

[NEW YORK] From Alaska to Oklahoma, crowded classes, suspended art programs and longer school commutes give students and parents a taste of the downside of cheap gas as oil-producing states scramble to plug budget holes blown by tumbling crude prices.

Spending on education, healthcare and other services is either being cut or faces cutbacks in about half a dozen states that have relied on oil taxes for a sizeable part of their revenues and most did not prepare for oil diving as deep as US$30 a barrel.

Heather Popowsky, who has fourth, seventh and eighth graders in Edmond Public Schools in Oklahoma City, said the belt-tightening was evident. "I have seen elective programs like music and art cut back. I've seen a shortage of new teacher hires, so student to teacher ratio has risen. There has been an increased call out for additional supplies at school." Oklahoma, where oil-related revenue has accounted for 10 per cent of the budget at the peak of the shale boom in 2014, in December slashed its oil production tax revenue forecast for this year to US$2 million from US$102 million planned for in June.

The state has already cut spending on education, which accounts for a third of its US$7 billion budget, by US$25 million in the 2015-2016 fiscal year and another US$20 million cut looms. "We're starting to have conversations now that this is as bad as it was back during the energy industry crash of the 1980s," said Matt Holder, chief operating officer for the Oklahoma Department of Education. "Some of our smaller school districts are having talks about whether they are going to make it through the next crunch," he said.

Other services will feel the squeeze too with Medicaid providers facing a 3 per cent cut in payments and a hiring freeze in force at the state's department of human services, says David Blatt, director of the Oklahoma Policy Institute, an independent think tank.

Alaska, where until recently oil tax revenue funded up to 90 per cent of the state budget is set for a 68 per cent gap between spending and revenues this year, according to Moody's.

Its Governor Bill Walker has suggested taxing residents'income for the first time in 35 years. He also proposed using part of the money earned by the state's US$47 billion "rainy day"fund to cover state expenses rather than pay out as an annual dividend to residents as usual.

ONE-LEGGED BUDGET Despite Walker's proposals, Standard and Poor's this month lowered its rating on Alaska's debt to AA+ from AAA.

With cuts to the US$1.4 billion education budget on the agenda, schools - particularly those in remote areas - could eventually be forced to shutter, said Mike Hanley, commissioner for the Alaska state Department of Education. "Oil revenues have treated us very well," Hanley said. "But Alaska is a one-legged revenue stool and we've become too dependent on oil." David Teal, director of Alaska's Legislative Finance Division, said services such as healthcare and corrections could also face cuts. "Of course, people are complaining loudly about reductions in ferry service and snow plowing, but I am not sure they realize that other services will be reduced," he said.

While Alaska's financial buffer eases the immediate pressure, the diversified economies of other leading oil producers - Texas and California - make them less vulnerable to the oil slump. California, the nation's third largest producer, is also less exposed because it has never taxed oil production.

The outlook is bleaker for states such as Oklahoma, North Dakota, or Wyoming, that have less of a financial cushion and depend more on the oil industry for jobs and income.

North Dakota, the epicenter of the shale oil boom and the second largest US producer behind Texas, faces a budget shortfall of more than US$1 billion and is now debating whether to dip into its reserve fund first or slash spending, including a proposed US$72 million cut in the state's education budget.

"If you look at a lot of the states that aren't dependent on oil production, their revenue forecasts are for growth," said Gabriel Petek, an analyst at S&P. "But if you look at these other states, it's almost like a parallel universe," he said. "If anything, there are cutbacks." In a recent report, Petek said that as oil industry jobs losses mount, so too does demand for state-funded social services paid for by the state, possibly setting oil-dependent states for more credit downgrades and greater financial stress.

REUTERS

    
 

World's largest energy trader sees a decade of low oil price

Oil prices will stay low for as long as 10 years as Chinese economic growth slows and the U.S. shale industry acts as a cap on any rally, according to the world's largest independent oil-trading house. 

PHOTO: BLOOMBERG

FEB 8, 20168:07 PM

[LONDON] Oil prices will stay low for as long as 10 years as Chinese economic growth slows and the U.S. shale industry acts as a cap on any rally, according to the world's largest independent oil-trading house.

"It's hard to see a dramatic price increase," Vitol Group BV Chief Executive Officer Ian Taylor told Bloomberg in an interview, saying prices were likely to bounce around a band with a midpoint of US$50 a barrel for the next decade.

"We really do imagine a band," probably between US$40 and US$60 a barrel, he said. "I can see that band lasting for five to ten years. I think it's fundamentally different."

The lower boundary would imply little recovery for Brent crude, the global benchmark, which traded for US$33.38 a barrel at 10:16 am Monday on the London-based ICE Futures Europe exchange. The upper limit would put prices back to the level of July 2015, when the oil industry was already taking measures to weather the crisis.

The forecast, made as the oil trading community's annual IP Week gathering starts in London, would mean oil-rich countries and the energy industry would face the longest stretch of low prices since the 1986-1999 period, when crude mostly traded between US$10 and US$20 a barrel.

Vitol trades more than 5 million barrels a day of crude and refined products - enough to cover the needs of Germany, France and Spain together - and its views are closely followed in the oil industry.

Taylor, a 59-year-old trader-cum-executive who started his career at Royal Dutch Shell Plc in the late 1970s, said he was unsure whether prices have already bottomed out, as supply continued to outpace demand, leading to ever higher global stockpiles. However, he said that prices were likely to recover somewhat in the second half of the year, toward US$45 to US$50 a barrel.

For the foreseeable future, Taylor doubts the oil market would ever see the triple-digit prices that fattened the sovereign wealth funds of Middle East countries and propelled the valuations of companies such as Exxon Mobil Corp. and BP Plc.

"You have to believe that there is a possibility that you will not necessarily go back above US$100, you know, ever," he said.

The problem is that "there is so much more supply" while the global economy is more efficient in consuming crude. On top of that, Iran is returning to the market and growth in emerging markets, the biggest engine of oil demand, is slowing.

"China has changed," he said.

Oil prices plunged after the Organization of Petroleum Exporting Countries in November 2014 diverged from its traditional policy of adjusting supply to manage prices, announcing it would maintain output to defend its position in the market. The group formally dropped any production limits in December, boosting output and intensifying a price war against higher-cost producers including U.S. shale operations, the North Sea, Canada's tar sands and deep-water discoveries in Brazil and Angola.

Taylor said there could be an agreement between Opec and non-Opec countries like Russia to cut production. "It's probably slightly against, 60-40 against, but it's a real possibility," he said.

Saudi Arabia held talks in Riyadh Sunday with Venezuela, which is trying to drum up support for a coordinated oil-output cut to buttress prices. While Saudi Oil Minister Ali al-Naimi said he held "successful" talks with his Venezuelan counterpart Eulogio del Pino on ways of cooperating to stabilize the market, he didn't specify any steps producers could take to shore up prices.

While the price slump has hurt oil producers, independent traders such as Vitol and its competitors Trafigura Group Pte, Glencore Plc, Gunvor Group Ltd, Castleton Commodities International LLC and Mercuria Energy Group Ltd. are profiting from the increase in volatility.

These companies also benefit from a market structure called contango - where forward prices are higher than current costs. This allows traders to buy oil, store it in tanks and use derivatives to lock in a higher selling price for a later date.

Taylor said that Vitol, which celebrates its 50th anniversary this year and is owned by its employees, would report net income for 2015 above the US$1.35 billion it earned in 2014. However, he said the company wouldn't match the record of almost US$2.3 billion of 2009. Taylor said that the company, which doesn't publicly release its profit, planned to take writedowns in its exploration and production business and make provisions against customers defaulting on contracts. The company, formally based in Rotterdam, has its major trading floors in London, Geneva, Singapore and Houston.

BLOOMBERG

    
 

Oil prices rally on Saudi-Venezuela talks

Crude prices rebounded in Asia on Monday news that the oil ministers of Saudi Arabia and Venezuela had held talks on stabilising the beleaguered market raised hopes of production cuts. 

PHOTO: BLOOMBERG

FEB 8, 20165:43 PM

[TOKYO] Crude prices rebounded in Asia on Monday news that the oil ministers of Saudi Arabia and Venezuela had held talks on stabilising the beleaguered market raised hopes of production cuts.

However, a pick-up in the dollar weighed on the commodity, with a drop in US unemployment and improving wage growth fuelling talk that the Federal Reserve could lift interest rates again next month.

And analysts warned there was unlikely to be a strong rally in prices for some time owing to the global supply glut and weak demand.

At around 0800 GMT, US benchmark West Texas Intermediate for delivery in March was 21 cents, or 0.68 per cent, higher at $31.10, while Brent crude for April was 20 cents, or 0.59 per cent, down at $34.26.

Major exporter Saudi Arabia announced discussions between Ali al-Naimi and his Venezuelan opposite Eulogio Del Pino Sunday to discuss the South American country's talks with other producers to boost prices.

The plunge in oil prices to 12-year lows - owing to a severe supply glut, weak demand and the strong dollar - has hammered producer nations such as Venezuela and Nigeria which rely on the commodity's income to fuel their economies.

However, the OPEC producers' group - of which Saudi Arabia is the key member - has refused to cut output as it looks to maintain market share in the face of competition from US shale.

WTI is down almost 20 per cent this year and Brent more than 10 per cent.

"There are very little signs of abatement on the supply side," Michael McCarthy, a chief strategist at CMC Markets in Sydney, told Bloomberg News.

And Ian Taylor, chief executive of Vitol Group BV, the world's largest independent oil trader, said: "It's hard to see a dramatic price increase." He tipped prices to move between $40 and $60 a barrel over the next decade.

The dollar climbed after the Labor Department said Friday that the US jobless rate had fallen to an eight-year low and wage growth picked up.

That fuelled speculation of another Fed rate hike, which attracts investors to the dollar. A strong greenback makes dollar-priced oil more expensive for customers using weaker currencies.

AF
P

US jobs report warns of end to bull market

Economy faces struggle amid rock-bottom oil prices and sky-high US dollar valuation

By

Rob Curranbtworld@sph.com.sg

REALITY CHECK: Only 151,000 jobs were added to payrolls by employers in January, and weekly jobless claims showed a marked increase in the number of layoffs. 

PHOTO: AFP

FEB 8, 20165:50 AM

FRIDAY's jobs report dragged down stocks for another weekly loss and hinted that the US economic expansion and bull market may be close to an end.

The slowdown of the US labour market is another sign that the American economy will struggle in a world of rock-bottom oil prices and sky-high US dollar valuation. Financial pundits and central bankers had long argued that the US would be spared the worst of the commodities and currency crashes. Now, many are warning that US growth is in imminent danger.

Only 151,000 jobs were added to payrolls by employers in January, and weekly jobless claims showed a marked increase in the number of layoffs. Taken in aggregate, recent labour-market data suggests that the oil companies and machinery makers who had held onto employees in the hopes that the commodities bust was short-lived, are now finally throwing in the towel and letting workers go in large numbers.

"There were a lot of Wall Street guys running around a year ago, (telling oil executives) that every time oil prices fell, they would come back quickly," said Steve Chiavarone, portfolio manager at mutual-fund firm Federated Investors. "I believe oil companies did a lot more furloughing than firing, a lot more siloing (or storage) of oil than hedging. Now, they believe it's going to be low till the end of days. That could put some pressure on Texas and Denver housing and the employment situation ... those are at risk."

The new byword on Wall Street is: "lower for longer."

In a research note last week, analysts at brokerage Citigroup warned of a "negative feedback loop" in the global economy it dubbed "Oilmageddon". The US dollar rises, weighing down the price of oil and stressing finances in emerging markets; demand slows in emerging markets and investment dries up, hurting oil prices and currencies further; that drives up the US dollar again, perpetuating the vicious cycle.

Analysts at Morgan Stanley, meanwhile, studied the implications for global markets of oil being "lower for longer". Defaults on high-yield bonds in the US are set to rise, and become very prevalent among energy-industry borrowers, they warned. For now, however, the Morgan Stanley analysts said other sectors, such as big banks, were being judged too harshly on their ability to digest losses from energy clients.

There are already signs of knock-on effects in US data outside the labour market and high-yield bond markets.

For months, investors had hoped the weakness in the US economy was limited to the companies directly exposed to China, oil and other commodities.

Sure, they said, miners such as Freeport-McMoRan and machinery makers like Caterpillar are in dire straits, but look at the growth rate of services companies like American Airlines and Alphabet, the company formerly known as Google.

Last week, American posted robust earnings growth, helped by savings on fuel. But the largest US carrier by traffic also warned that its revenue per-seat was likely going to continue a downward slide. That's because fuel prices have increased the number of planes in the air, driving ticket prices down.

Google's earnings in late January propelled Alphabet to the position of the largest company in the world by market capitalisation. But the glory was short-lived. When the head of Google's thriving search business quit, Alphabet's shares lost more than 8 per cent in the next three days. Those losses were a reminder of the ephemeral nature of success in Silicon Valley.

That moral was even more starkly illustrated by LinkedIn's Friday earnings report, where it warned it would have to change its approach to rediscover high growth rates. One of the stars of "Internet 2.0", the venture capital and stock-market rush that also made Facebook one of the largest companies in the world, LinkedIn was not supposed to be vulnerable to economic slowdowns.

According to the bulls, oil's crash was supposed to spur growth in the services sector, which would offset weakness elsewhere. Apparently not. The Institute for Supply Management's data survey for January showed the rate of growth in services industries slowing. The services data could be an aberration but, coming on top of the decline in industrial activity, central bankers will monitor it carefully, said Robert Kaplan, president of the Federal Reserve Bank of Dallas.

Mr Kaplan refused to be drawn on whether his concern about weaker data would influence his position on future rate hikes, but he did say central bankers were in a "watchful waiting" mode.

"We know manufacturing is already in recession," said Mr Chiavarone, of Federated. "The questions is, in that tale of two economies, is the services sector holding up its side?"

It's getting much harder to find a bullish stock strategist. The few that remain optimistic sound a bit like they did in 2007 and 2008. Back then, the bulls started by boldly claiming only a handful of banks and builders would be sucked under by the correction in US housing markets. As the pain spread, bullish strategists back then retreated to the sectors they saw as removed from the US housing market, such as commodities producers and multinational tech companies. In the end, no one was safe.

One difference this time round is that there is no massive financial entity holding all the hedges for oil companies the way that American International Group held all the hedges for speculators on mortgage markets, explained Mr Chiavarone. Still, he added that his firm is on watch for recession signs for the first time in years.

For now, central bankers and market strategists are watching US data like doctors in an intensive-care unit watching the chart lines of a cardiogram.

The bull market is in critical condition. Another drop for oil this week might just kill it off.

    
 

CNY essentials see drop in prices this year

This year's drop in The Business Times Fa Cai Index is driven mostly by a steep fall in abalone prices

By

Grace Sograceso@sph.com.sg

TEMPTING CNY FAVOURITE: According to The Business Times Fa Cai Index, bak kwa prices fell 5.3 per cent this year compared to last year. The downturn in the prices of the four festive items could be attributed to more cautious sentiment from businesses and households. 

PHOTO: ARTHUR LEE

 Cheaper treats

FEB 8, 20165:50 AM

Singapore

ALTHOUGH they have risen steadily over the past six years, Chinese New Year (CNY) food prices have fallen considerably this year - at least according to The Business Times Fa Cai Index, which tracks the average price of an equally weighted basket of four popular festive food items, namely mandarin oranges, beer, abalone and bak kwa, in the weeks before the festival.

The food items were chosen based on price availability and the ability to make year-on-year comparisons.

The basket is considerably cheaper this year, with prices falling 8 per cent year on year. This is in sharp contrast with last year's 1.29 per cent increase, as well as the steeper 4.32 per cent increase in the year before.

This year, prices of all four goods have fallen, with the largest declines seen in abalone, followed by mandarin oranges. Abalone prices have on average fallen a staggering 18.6 per cent, while mandarin orange prices were down by almost 10 per cent.

Meanwhile, less dramatic price declines were seen for bak kwa (a 5.3 per cent drop), and for beer (a 1.4 per cent fall).

The downturn in prices could be attributed to "more cautious sentiment from businesses and households", said OCBC economist Selena Ling.

"The headline Consumer Price Index (CPI) is likely to stay negative at least for the first half of 2016, if not for the full year," Ms Ling added, when asked if the downturn in prices could mean a deflationary outlook for Singapore's economy.

The index measures headline inflation by calculating the cost to purchase a fixed basket of goods.

Meanwhile, major supermarkets partly attributed the drop in prices to good harvests.

"For Lukan mandarin oranges, the fall in prices is due to a good harvest this year," a FairPrice spokesman told BT, adding that some of the other varieties of the fruit have had a good harvest this year as well.

This view was similarly echoed by the other retailers. "As for mandarin oranges, Giant brought in more volume, in addition to working closely with our suppliers to lock in orders and prices very much earlier, thus savings could be passed on to our consumers," a Giant spokesman told BT.

For beer, many retailers like Sheng Siong, FairPrice and Giant offered promotional prices on Tiger beer during the two weeks prior to CNY.

When asked about the reason behind the fall in beer prices, the Giant spokesman said that it is due to the close relationship that the supermarket shares with its suppliers. This is so that they can offer their customers "the best in price and quality". The supermarket chain has a reputation for low prices and no-frills service.

However, aside from the occasional good harvest and retailers' efforts to push for lower prices from their suppliers, this year's index drop was driven mostly by a steep fall in abalone prices.

For example, New Moon's Australian abalone prices have fallen by almost S$10 per 425g can on average, compared with 2014. "This is due to the dual effect of a weak Australian dollar and an abundant supply of abalone (good harvest)," explained a Sheng Siong spokesman.

The Giant spokesman also confirmed this, saying: "Retail prices (for New Moon's abalone) have indeed dropped by 10 to 15 per cent at Giant. This is because the costs from our suppliers have gone down as well."

However, the spokesman also added that "generally, the uncertainty in the economy definitely has had some impact on the costs of these items".

    
 

More red ink than red packets

At least 31 profit warnings posted by S'pore-listed companies since the start of the year

By

Melissa Tanmelissat@sph.com.sg@MelissaTanBT

NEW YEAR CHEER DAMPENED: Analysts warn that more O&M sector companies and related firms could end up flagging net losses this year and the next, pointing to deepening capital expenditure cuts by upstream energy giants that will weigh heavy on the bottom lines of smaller downstream players. 

PHOTO: ARTHUR LEE

FEB 8, 20165:50 AM

Singapore

THIS is not the red investors are looking for - in the lead-up to Chinese New Year, there have been so many profit warnings from Singapore-listed companies that the number averages nearly one for every day since the start of 2016.

It is a reflection of the damage wrought by a prolonged slump in crude oil prices that about a third of these were from offshore & marine (O&M) firms or companies that sell to them, according to bourse filings compiled by The Business Times.

The rest were a mixed bag that included firms involved in commodities, steel, construction, retail and other sectors.

Analysts warn that more O&M sector companies and related firms could end up flagging net losses this year and the next, pointing to deepening capital expenditure cuts by upstream energy giants that will weigh heavy on the bottom lines of smaller downstream players over the coming months.

But for the overall Singapore stock market, analysts still see some relatively bright spots in sectors such as manufacturing where firms may be able to benefit from a weaker Singapore dollar.

There have been at least 31 profit warnings posted by Singapore-listed companies since the start of the year. Out of that, roughly a third, or at least nine warnings, were from companies that are either in the O&M sector or serve the industry.

These include Ezra Holdings, SBI Offshore, Technics Oil & Gas, Gaylin Holdings and Beng Kuang Marine, with several blaming sluggish energy market conditions due to the prolonged crude oil slump.

These O&M firms are not likely to be the last to warn of poor earnings, analysts say, adding that more O&M firms could take writedowns in the coming months following substantial capital expenditure cuts by upstream players.

"The major upstream oil companies have been cutting capex for the second consecutive year, so it's natural that all those along the value chain will see their revenue streams cut by at least 50 per cent," said KGI Fraser analyst Joel Ng.

He said the local market could see more O&M firms warning of net losses or substantial declines in earnings given that "a lot of contracts are ending" this year.

NRA Capital research head Liu Jinshu agreed that the O&M sector would "continue to come under pressure earnings-wise", but said that some stocks were now looking attractive from a valuation perspective. "Keppel Corp, for instance, at less than S$5 is looking rather attractive given that it's trading below book value," he said.

For other sectors in the local stock market, he said one bright spot could be manufacturing, since some manufacturers could benefit from the weaker Singapore dollar this year.

He raised concerns about local banks' exposure to the commodities sector, flagging a potential risk of "some write-offs coming from there".

Property developers may continue to come under pressure because of earnings concerns but most of the downside has been priced in, he said, adding that although the slump in the real estate industry has also affected the construction sector, some civil engineering players could benefit from the development of Changi East. Changi East is a 1,080ha plot of land located east of the present Changi Airport.