MARKETS INSIGHT

Eye on corporate results, China data this week

The Bund in Shanghai, overlooking the financial district of Pudong in the Chinese city. Market watchers remain divided on the outlook for China, which will release financial and economic data this week.
The Bund in Shanghai, overlooking the financial district of Pudong in the Chinese city. Market watchers remain divided on the outlook for China, which will release financial and economic data this week. PHOTO: AGENCE FRANCE-PRESSE

Investors will be kept busy as latest figures roll in, with focus on China's prospects

With a slew of July economic data coming out of China, plus more big firms in Singapore lined up to announce their results, investors will have plenty to chew on over the coming days.

Market watchers remain divided on the outlook for China, which will release its trade data today, followed by inflation figures tomorrow and industrial production figures on Friday.

Bank of America Merrill Lynch expects the fresh data to show stable growth momentum in Asia's most important economy.

"We expect that the year-on-year growth of industrial production and fixed asset investment ticked up (in July)," it said in a recent note.

But HSBC economist Jing Li has warned of downside risks to China's growth after July's Caixin services purchasing managers' index moderated.

MORE SUPPORT NEEDED

The uncertainties in the property sector and fragile business sentiment both dampen the growth outlook. We believe more aggressive growth-supportive policies are still warranted.

HSBC ECONOMIST JING LI, who warns of downside risks to China's growth after July's Caixin services purchasing managers' index moderated.

"The uncertainties in the property sector and fragile business sentiment both dampen the growth outlook. We believe more aggressive growth-supportive policies are still warranted," she said last week.

Chinese investors have been less than bullish, and the Shanghai Composite Index ended the past week flat.

Singapore's benchmark Straits Times Index slipped 1.41 per cent last week, as investors sold down on the recent Brexit rally.

Still, the top Singapore-listed Chinese firms have had a relatively good year so far, Singapore Exchange data revealed. As of Aug 4, the 20 biggest counters in the segment have averaged a 7.4 per cent total return this year, compared to a 20.6 per cent decline in Singdollar terms for Shanghai Composite.

China Aviation Oil Singapore has been the top performer of the bunch, with a total return of 120.8 per cent in the period. It last closed at $1.565. Late last month, the jet fuel company - the only supplier of imported jet fuel in China - reported a 32.8 per cent year-on-year increase in second-quarter net profit to US$23.6 million (S$31.7 million).

DBS analyst Paul Yong has kept his buy call for the company, with a higher target price of $1.70. Aside from its strong volumes, its 33 per cent-owned associate Shanghai Pudong International Airport Aviation Fuel Supply Company (SPIA) is another factor in its favour.

"As the exclusive supplier of jet fuel to Pudong International Airport, SPIA... should continue to benefit from rising air traffic at the airport, which is driven by the continued development of Shanghai as China's key financial centre," Mr Yong said.

Meanwhile, more blue chip firms will report their results this week, with DBS doing so today, Singtel and Wilmar International on Thursday, and Golden Agri-Resources and Global Logistic Properties on Friday.

Facing concerns over its exposure to the demise of Swiber Holdings, DBS was hit by some recent selloff and was down 3.8 per cent over the past week to $14.83.

OCBC research head Carmen Lee warned that DBS' allowances may hit almost $1 billion this year. "The last time allowances were at this elevated level was during the global financial crisis," she added.

Wilmar has also been under scrutiny following its profit warning last month. It dropped 1.6 per cent last week to $3.04.

A version of this article appeared in the print edition of The Straits Times on August 08, 2016, with the headline 'Eye on corporate results, China data this week'. Print Edition | Subscribe