Markets Insights

Focus on export figures and major economies data

Workers loading bricks of tea leaves for export at a brick tea company in Wuyi, in China's eastern Zhejiang province. The company plans to tap trade routes being developed as part of China's Belt and Road trade initiative.
Workers loading bricks of tea leaves for export at a brick tea company in Wuyi, in China's eastern Zhejiang province. The company plans to tap trade routes being developed as part of China's Belt and Road trade initiative.PHOTO: AGENCE FRANCE-PRESSE

Major event is Beijing's Silk Road summit, with China pledging $174b to project

Local investors this week will be mulling over a pledge by China to spend US$124 billion (S$174 billion) on its ambitious new Silk Road project as well as seeing if the latest Singapore export figures continue a recent trade resurgence.

At Beijing's Silk Road summit on China's trade and infrastructure initiative for Asia, Africa and Europe yesterday, President Xi Jinping said the project would be a path to peace and prosperity for the world.

On the home front, official non-oil domestic exports data for April will be released on Wednesday, offering clues on whether a strong fourth-month rebound in trade figures is continuing.

DBS Equity Research noted that the overall market mood remains optimistic with global economic recovery at its most robust pace since the 2008 financial crisis, with the International Monetary Fund raising its forecast for global economic growth for the first time in six years to 3.5 per cent.

DBS kept its "overweight" call on Singapore equities, noting that "valuations can continue to re-rate in a recovery scenario".

The benchmark Straits Times Index (STI) slipped 0.48 per cent, or 15.82 points, to 3,255.29 last Friday, but also hit its highest level in almost two years.

It closed 0.8 per cent higher for the week.

Much of this was helped by Mr Emmanuel Macron's resounding victory in the May 7 French presidential election.

The three Singapore banks stole the show as they booked solid gains, especially after OCBC Bank reported a surprisingly strong 14 per cent rise in first-quarter net profit to $973 million last Tuesday.

On Thursday, OCBC said it has agreed to acquire National Australia Bank's private wealth business in Singapore and Hong Kong. The stock slid 0.95 per cent, or one cent, to $10.55 last Friday, but was still 3.2 per cent higher for the week.

DBS Group Holdings racked up a 1.3 per cent gain through the week to finish at $20.68, while United Overseas Bank was about 1 per cent up at $23.59.

Mr Simon Chen, vice-president - senior analyst at Moody's Investors Service, said in a report that the latest financial results of all three local banks point to "a moderation in their asset risk and an improvement in overall profitability".

"This trend is in line with our view that non-performing-loan (NPL) formation rates and credit costs, primarily from the embattled oil and gas services sector, peaked in 2016 and suggests that these banks' asset quality and profitability pressures will remain manageable," said Mr Chen.

"Furthermore, the banks' loss- absorption buffers have improved amid a slower pace of risk- weighted asset growth."

Meanwhile, Noble Group took a huge hit as it nosedived 24 per cent, or 21 cents, to 66.5 cents on Friday - its lowest level in about 15 years - after the commodity trader reported a loss of US$129.3 million (S$182 million) for the first quarter and said it might not be profitable until 2019.

Macquarie Capital Securities cut its rating on the stock to "underperform", noting that "with significant headwinds, Noble is still deep in the woods".

More companies will continue to unveil quarterly earnings this week, with both Golden Agri-Resources and Olam International due to announce results today. Singtel and Singapore Airlines will release results on Thursday, followed by Sats on Friday.

Traders will likely also be keeping an eye out for data from China, which is releasing numbers on fixed-asset investments, industrial production and retail sales today. Japan and Malaysia will publish gross domestic product figures on Thursday and Friday respectively.

A version of this article appeared in the print edition of The Straits Times on May 15, 2017, with the headline 'Focus on export figures and major economies data'. Print Edition | Subscribe