Markets Insight

All eyes on key local data out this week

Financial counters powered most of the gains last week, both on Wall Street and at home. Local investors pushed the Straits Times Index up 0.85 per cent.
Financial counters powered most of the gains last week, both on Wall Street and at home. Local investors pushed the Straits Times Index up 0.85 per cent.ST PHOTO: CAROLINE CHIA

Last week's rally helped to lift sentiment ahead of release of Q3 and industrial production figures

Investors in Singapore are likely eyeing the release of important local economic data at the end of the week, but sentiment has been cushioned by a rally over the past week.

Singapore's third-quarter economic data is due on Thursday, while industrial production numbers will be released on Friday.

Both sets of figures are coming out amid a slew of gloomy economic signs, which has had some forecasters warning that a technical recession might be possible.

However, this seemed far from the minds of local investors, who pushed the benchmark Straits Times Index up 0.85 per cent this past week by snapping up oversold banking and commodity counters.

They were likely buoyed by Wall Street, which had rallied to record highs following Mr Donald Trump's shock victory in the United States presidential election on Nov 8.

However, the election-fuelled rally moderated on Friday, which may signal a pullback in Asia when markets open today.

Regional investors also had their eyes on the Asia-Pacific Economic Cooperation (Apec) summit in Peru for signs of what regional leaders would do, now that the fate of the Trans-Pacific Partnership hangs in the balance.

Mr Trump has said he would scrap the massive trade deal involving 12 countries.

Financial counters powered most of the gains last week, both on Wall Street and at home.

DBS Group has rallied 9.1 per cent since Nov 9, OCBC gained nearly 5 per cent, and UOB rose 6.2 per cent.

The commodity sector is also drawing investor interest, noted CMC Markets analyst Margaret Yang.

"There's speculation of more merger and acquisition deals in distressed oil and gas companies. The valuation of the Singapore stock market is now among the lowest in Asia, which makes it attractive to value investors as well as overseas buyers," she said.

The consumer goods sector received a boost from commodity counters First Resources and Wilmar International, which rallied on stronger crude palm oil prices following news that palm oil inventories in Malaysia grew at a slower-than-expected pace, DBS Group Research said.

The strengthening greenback will also benefit companies with revenues based in US dollars and costs in domestic currencies, the broker said.

"Crude palm oil stocks Bumitama Agri and Indofood Agri are good examples with their revenues fully in USD while about half of their costs are in rupiah."

The US dollar, seen as a safe haven currency in times of uncertainty, has been strengthening steadily against Asian currencies since the US election.

Local counters with defence components could benefit from Mr Trump's calls for an increase in US military spending that could amount to US$500 billion (S$713 billion) or more, DBS Group Research said in a note.

"The defence division of ST Engineering should benefit from increased military spending if more countries around the world also seek to beef up their own defences."

Minutes from the US Federal Reserve's meeting on Nov 1 and 2 are due on Wednesday, but these are unlikely to provide any new insights on the central bank's plans for interest rate-related actions.

Federal Reserve chairman Janet Yellen has already given a clear signal that the Fed will raise rates next month, as economic conditions point to "strengthening growth and an improving labour market".

A version of this article appeared in the print edition of The Straits Times on November 21, 2016, with the headline 'All eyes on key local data out this week'. Print Edition | Subscribe