Markets Insight

Caution expected ahead of quarterly results

One development this week that could help add colour to the otherwise-drab market is the potential buyout of Osim International. Founder Ron Sim last Friday upped his cash offer for the firm from $1.39 to $1.41 per share, inclusive of a two-cent fina
One development this week that could help add colour to the otherwise-drab market is the potential buyout of Osim International. Founder Ron Sim last Friday upped his cash offer for the firm from $1.39 to $1.41 per share, inclusive of a two-cent final dividend.PHOTO: OSIM

Traders will likely monitor impact of regional economy on corporate profits, says analyst

Singapore equities will likely remain in a lull this week, with the corporate earnings season set to kick off amid lingering concerns over global growth.

But one development that could help add colour to the otherwise-drab market is the potential buyout of Osim International.

Founder Ron Sim last Friday upped his cash offer for the firm from $1.39 to $1.41 per share, inclusive of a two-cent final dividend.

Still, Ms Margaret Yang, market analyst at CMC Markets Singapore, believes that local shares are likely to "continue to consolidate" even up until the end of the month, after the release of company results paints a clearer picture of how Singapore corporates are faring amid the slowing global economy.

"Investors need to carefully monitor the impact of regional economic weakness on corporate profits," she told The Straits Times.

Traders will also be closely watching data on Singapore's first- quarter gross domestic product, which will be announced on Thursday morning.

The economy expanded 2 per cent last year, marking a slowdown from the 3.3 per cent growth in 2014, due largely to the slump in commodity prices, which weighed on export numbers. The Ministry of Trade and Industry has a growth forecast of 1 per cent to 3 per cent for this year.

Of the blue chips, Singapore Press Holdings will be the first tomorrow to announce quarterly results, followed by CapitaLand Commercial Trust on Friday.

Traders will also be closely watching data on Singapore's first-quarter gross domestic product, which will be announced on Thursday morning.

The economy expanded 2 per cent last year, marking a slowdown from the 3.3 per cent growth in 2014, due largely to the slump in commodity prices, which weighed on export numbers.

The Ministry of Trade and Industry has a growth forecast of 1 per cent to 3 per cent for this year.

The Singapore market, in line with most others in Asia, had a shaky run in the past week. The benchmark Straits Times Index slid 10.17 points, or 0.36 per cent, logging its third weekly drop.

Tokyo bucked the regional trend to post its biggest rally in two weeks, after its finance minister pledged to take action against rapid currency movements.

The highlight of the week was the minutes of the United States Federal Reserve's March Open Market Committee meeting that were released last Thursday, which showed most Fed governors were against raising rates this month.

But Fed chairman Janet Yellen said last Thursday that the US economy is on a solid course and still on track to warrant further interest rate hikes.

Analysts believe that a focus on the United States and crude oil prices could continue to set the stage for Asian equities this week.

"Regional stock markets declined as global growth concerns came back to haunt the markets and the Fed appears to keep its tightening bias on track," said Phillip Capital in Bangkok, Reuters reported.

"Also, the world's crude oil price is taking a roller-coaster ride along with high crude inventories."

Traders will likely track the corporate earnings season in the US, which also begins today, for clues to the health of the country's economy. It has been forecast as the worst season since the 2008 financial crisis.

Wall Street put on 0.2 per cent last Friday, buoyed by a rally in crude prices.

"You still have a lot of uncertainty surrounding earnings," Mr Peter Jankovskis, the co-chief investment officer of Illinois-based OakBrook Investments, told Bloomberg. "People don't want to jump in and take a big position either way in front of an earnings number that people expect to be down."

Also high on the radar is China's first-quarter gross domestic product and inflation data on Friday.

On Sunday, leading oil producers will convene in Doha to discuss freezing output to help rebalance the heavily glutted crude market.

A version of this article appeared in the print edition of The Straits Times on April 11, 2016, with the headline 'Caution expected ahead of quarterly results'. Print Edition | Subscribe