MarketsInsights

Analysts expect recent spurt to follow through

Oil fields in Basra, south-east of Baghdad, Iraq. The Organisation of Petroleum Exporting Countries last Thursday agreed to reduce oil production for the first time in about eight years.
Oil fields in Basra, south-east of Baghdad, Iraq. The Organisation of Petroleum Exporting Countries last Thursday agreed to reduce oil production for the first time in about eight years.PHOTO: REUTERS

Energy-related stocks could hog the limelight after Opec's decision to cut oil production

The Singapore stock market could continue to gain momentum this week, after having posted a stellar showing last week, according to market analysts.

Singapore shares enjoyed a boost last week amid a Trump-led rally in the United States. 

The benchmark Straits Times Index (STI) was up by 2.1 per cent for the week - its strongest weekly performance since early September.

But it slid 9.21 points, or 0.31 per cent, to 2,919.37 last Friday, snapping an eight-day winning streak.

Still, KGI Securities (Singapore) market strategist Nicholas Teo said the rally in local equities "looks like it may have legs to go further", or at least until Dec 14, when the United States Federal Reserve is widely expected to raise interest rates.

YEAR-END TREND

We have about 2½ weeks left of trading in the year, and things may get technical due to the usual book-closing and year-end window dressing activities. But combine that with the upcoming Fed meeting - things can get rather interesting.

KGI SECURITIES (SINGAPORE) MARKET STRATEGIST NICHOLAS TEO, on where the market might be heading this week.

"The rally here has been a late one and many would not like to miss it, and this could fuel it further," Mr Teo told The Straits Times, adding that oil-related plays will likely "continue to dominate and steal some of the action that has been around the banks".

This comes as the Organisation of the Petroleum Exporting Countries (Opec) last Thursday agreed to cut output for the first time in about eight years.

Keppel Corporation closed at $5.93 on Friday, up 9.8 per cent for the week, and Sembcorp Industries was 7.3 per cent higher at $2.95.

That said, traders will also remain firmly focused on the US, in view of the highly anticipated rate hike, Mr Teo noted.

Wall Street dipped 0.11 per cent last Friday, after November's jobs data offered mixed signals on the strength of the labour market.

"We have about 2½ weeks left of trading in the year, and things may get technical due to the usual book-closing and year-end window dressing activities. But combine that with the upcoming Fed meeting - things can get rather interesting," he said.

RHB Securities Research analyst Leng Seng Choon noted in a report that Singapore Exchange (SGX) has seen a "marked pick-up" in the securities average daily value since the US presidential election on Nov 8. Last month's figure was $1.3 billion, 36 per cent higher than the average of $960 million for the period July to October.

Mr Leng expects the securities average daily value to remain high on the back of "more trading activities - as the Federal Reserve raises rates, more funds would switch to equities from fixed income instruments". He maintained a "buy" call on SGX, with a target price of $9.10.

Meanwhile, a number of key economic events are also set to take the stage this week.

The Reserve Bank of Australia is expected to hold interest rates at its meeting tomorrow, while the European Central Bank will hold its last meeting for the year on Thursday, following the outcome of the Austrian elections and the Italian referendum.

Closer to home, China is releasing foreign trade numbers on Thursday, followed by data on its consumer and producer price indices on Friday.

"Strong growth in retail sales, combined with the booming housing market, is providing demand-side pressures for China's consumer prices," said a Moody's Analytics note.

"Trade data for China is expected to show a slight improvement in exports, due to strong demand from the US and improvements in shipments to Europe."

A version of this article appeared in the print edition of The Straits Times on December 05, 2016, with the headline 'Analysts expect recent spurt to follow through MarketsInsights'. Print Edition | Subscribe