Markets Insight

Fasten your seat belts for more volatility ahead

South-east Asia's worst performer was the Kuala Lumpur Composite Index, which lost 3 per cent last year while Thai shares surged 19.79 per cent and Jakarta's index gained 15.32 per cent.
South-east Asia's worst performer was the Kuala Lumpur Composite Index, which lost 3 per cent last year while Thai shares surged 19.79 per cent and Jakarta's index gained 15.32 per cent.PHOTO: BLOOMBERG

Last year was a roller-coaster ride for the markets and traders are bracing themselves for more volatility ahead this year.

Most markets will be closed today for an extended New Year holiday but there is much in store over the rest of the week.

Markets will be watching Singapore's fourth-quarter economic growth numbers out tomorrow, as well as data from the United States later in the week.

The Straits Times Index (STI) closed 0.34 per cent up last week at 2,880.76 but was down 0.07 per cent for the year.

This reflected a hot-and-cold year that started with China's stock market taking a nosedive and oil prices sinking to historic lows.

But markets recovered at the end of the year after US President-elect Donald Trump's shock win and a rebound in commodity prices.

South-east Asia's worst performer was the Kuala Lumpur Composite Index, which lost 3 per cent last year while Thai shares surged 19.79 per cent and Jakarta's index gained 15.32 per cent.

Immediate resistance for the STI is seen at 2,900 in the near term, traders say. Whether the local bourse can break above that will depend on Singapore's fourth-quarter economic growth numbers.

"The current market consensus points at a 0.2 per cent year-on- year improvement. Should the data match consensus, this will be a significant step down from the 1.1 per cent year on year printed in the third quarter, and the lowest to be printed since 2009," IG market strategist Pan Jingyi said.

"Wall Street can be seen repositioning, and that could be the case for Asia as well. Pressure may set in for markets that have underperformed lately in Asia, though a pullback in the US dollar may provide some support," she added.

Data on US non-farm payrolls out on Friday will also be closely watched. The US central bank is expected to raise interest rates more aggressively this year and the data could offer insights into the timing of these hikes.

The market is expecting the non-farm payrolls to be largely unchanged but surprises could still whack stocks in either direction and s ignite further US dollar strength. This might fuel further capital outflow from Asian bourses.

Markets will also be looking out for the Federal Open Market Committee's latest minutes, to be out early Thursday in Singapore.

"While the first and only rate hike for (last year) had largely been within expectations, the market will likely look for clues as to what had supported the faster rate hike projections for 2017," Ms Pan said.

A version of this article appeared in the print edition of The Straits Times on January 02, 2017, with the headline 'Fasten your seat belts for more volatility ahead '. Print Edition | Subscribe