Markets Insight

Investors not quite unnerved by Trump-N. Korea verbal duel

Market set to focus on release of Singapore's CPI and industrial production figures this week

A worker welding reinforcement bars at a construction site in Hefei. While UBS sees S&P's downgrade of China's credit rating as no cause for panic, IG Asia market strategist Pan Jingyi feels that the coming Golden Week break may make the market excep
A worker welding reinforcement bars at a construction site in Hefei. While UBS sees S&P's downgrade of China's credit rating as no cause for panic, IG Asia market strategist Pan Jingyi feels that the coming Golden Week break may make the market exceptionally susceptible to outflows from retail investors which could weigh on price performance. PHOTO: REUTERS

Investors, like everyone else, are trying to comprehend the implications of the increasingly heated and bizarre war of words between United States President Donald Trump and North Korea's regime.

Last week, investors somehow began to treat the talk as background noise as the Straits Times Index put on 10.69 points, or 0.33 per cent, over the week to end at 3,220.25.

Assuming - and hoping - the situation on the Korean peninsula remains at a rhetorical and trade sanctions level, investors will look to more mundane matters.

All eyes here will soon be on Singapore's monthly economic figures, with the Consumer Price Index (CPI) numbers out today and industrial production data tomorrow.

Economists polled by Reuters expect August's inflation gauge to stay unchanged against the previous month, with the all-items CPI projected to inch up by 0.6 per cent year on year and the core inflation index likely to rise by 1.6 per cent.

ANZ Bank economist Ng Weiwen told Reuters: "While there were no scheduled price hikes, inflation will be largely driven by petrol prices, which were higher in August."

Meanwhile, a global boom in electronics demand probably gave industrial production a 14.2 per cent boost from a year earlier, predicted Reuters' economy watchers.

Factory metrics are slated to arrive in East Asia too, with South Korea and Japan releasing industrial production numbers on Friday.

That is when the Caixin China Purchasing Managers' Index will be released - one day ahead of the official figures - to shed light on the state of mainland manufacturing confidence - which S&P Global Ratings downgraded to A+ from AA-.

UBS' chief investment office has wagered that the long-term sovereign credit-rating move is no cause for panic, as "the risks from China's debt have, in fact, decreased this year". Its note last Friday added: "The resulting improved cash flow will reduce some pressure on the margins, and help slow the formation of non-performing loans."

But Chinese markets are gearing up for the one-week Golden Week vacation. IG Asia market strategist Pan Jingyi said in a note: "With the break, the market may be exceptionally susceptible to outflows from retail investors which could weigh on price performance."

Elsewhere, key US Federal Reserve people - including chair Janet Yellen and governor Lael Brainard - are set to speak soon. Their comments may shed further light on a likely December interest rate hike.

US House Speaker Paul Ryan has also vowed to unveil US corporate tax reform plans. IG Asia's Ms Pan said investors could be unnerved "should we find a negative turn of events" - given that much of the powerful run-up on Wall Street since Mr Trump's November election has been predicated on pro-business policies such as this one.

Join ST's Telegram channel and get the latest breaking news delivered to you.

A version of this article appeared in the print edition of The Straits Times on September 25, 2017, with the headline Investors not quite unnerved by Trump-N. Korea verbal duel. Subscribe