Markets Insights

Jittery week ahead for traders

Jitters increased last Friday after China's stocks tumbled the most since a US$5 trillion plunge in August, as the authorities launched regulatory probes into some of the country's largest brokerages. At the same time, industrial profits fell short o
Jitters increased last Friday after China's stocks tumbled the most since a US$5 trillion plunge in August, as the authorities launched regulatory probes into some of the country's largest brokerages. At the same time, industrial profits fell short of expectations.PHOTO: REUTERS

US interest rate hike looms as China probes malpractice in securities industry

This week is shaping up as a nervous one for traders as they look ahead to a likely hike in United States interest rates - and weigh the impact of China's latest crackdown on malpractice in the securities industry.

A slew of economic data is in the offing, some of it from the US, which could offer new clues on whether the Federal Reserve will indeed raise rates.

Fed chairman Janet Yellen is due to testify on Thursday and attention will then turn to non-farm payrolls set for release on Friday. It could show a gain of 200,000 jobs this month, after last month's surge of 271,000.

The data, noted IG market strategist Bernard Aw, could be "critical" ahead of the Federal Open Market Committee meeting on Dec 16-17 - widely expect to result in the first rate hike in nearly a decade.

"Furthermore, Fed chairman Janet Yellen will provide her testimony to the congressional Joint Economic Committee about the economic outlook, which would set the expectations concerning the pace of the policy tightening," he said.

Wall Street edged down 0.08 per cent last Friday in a short half-day trading session following the Thanksgiving holiday.

"We've actually had a pretty stable market for all the things that have been hitting at it," Mr Tom Stringfellow, president and chief investment officer of San Antonio- based Frost Investment Advisors, which manages about US$11 billion (S$15.5 billion), told Bloomberg.

"The data that spooked the market over the past half a dozen weeks is behind us, and I think we've got past the shock of whether a rate hike is a certainty at this point."

Ministers from the Organisation of Petroleum Exporting Countries (Opec) are also meeting on Friday to decide on their collective oil-production quota, which stands at 30 million barrels a day.

This could result in a possible cut in the output, as the weakness in oil prices continues to stretch out.

Opec has exceeded its output target since June last year, with an average of 31.6 million barrels a day in the first 10 months of this year.

The European Central Bank meeting on Thursday is also one to watch out for, given that more stimulus measures could come as economic recovery in the euro zone remains fragile. Markets were shaken early last week after Turkey downed a Russian fighter jet, escalating geopolitical tensions.

Jitters increased last Friday after China's stocks tumbled the most since a US$5 trillion plunge in August, as the authorities launched regulatory probes into some of the country's largest brokerages. At the same time, industrial profits fell short of expectations.

Singapore's benchmark Straits Times Index (STI) slid 25.57 points, or 0.89 per cent, to 2,859.11 - marking a loss of 58.79 points, or 2 per cent, for the week.

"It looks like the STI is battling downward pressure, despite overall gains in Chinese shares since August," said Mr Aw, adding that a warning from the Monetary Authority of Singapore (MAS) on risks for local lenders did not help sentiments.

The MAS noted that weaker balance sheets and currency market volatility may be key risks for local banks, while non-performing loans have grown 1.5 per cent year-on-year.

This did little for the three local banks, whose share prices have been slipping in recent sessions. OCBC Bank, for instance, shed a hefty 2.8 per cent for the week to finish at $8.68.

Neptune Orient Lines was also in the spotlight, following its confirmation more than a week ago that it is in exclusive talks with France's CMA CGM on a possible buyout.

The stock, which has been gaining ground since the start of the year on market talk of a potential acquisition, closed at $1.205, logging a weekly jump of 7.6 per cent.

A version of this article appeared in the print edition of The Straits Times on November 30, 2015, with the headline 'Jittery week ahead for traders'. Print Edition | Subscribe