The Straits Times Index has finally clawed back all the losses it suffered in January's bloodbath as oil prices rallied and investors took heart from the US Federal Reserve's signal it will not rush to lift interest rates.
The STI closed 0.92 per cent, or 26.63 points higher at 2,906.80 yesterday and is now in the money by 0.8 per cent so far this year, after plunging as much as 12.1 per cent at one point in January.
Remisier Alvin Yong sees the STI trading between 2,880 and 3,000 points until the market gets fresh indications on local corporate earnings in the next reporting season.
South-east Asian stocks are now the one bright spot this year across Asia, with bourses in Indonesia, Thailand, Malaysia, and now Singapore, in the money so far this year. By contrast, the larger markets in Japan and China are still down double-digits so far this year.
The Philippine Stock Exchange Index, which rose 1.3 per cent yesterday, is the first Asian bourse to break out of the bear's grip after rising 20 per cent from a low on Jan 21.
Global funds have been pouring into Indonesia and Thailand in recent weeks, sending the bourses up 7.4 per cent and 6.4 per cent respectively for the year to date. Malaysia is up 1.4 per cent. About US$160 million (S$216 million) of global funds have flowed into Indonesian equities during the same period, while US$329.5 million poured into Thai stocks, according to Bloomberg data.
That's a sharp reversal from last year when the region's bourses slumped to multi-year lows as prospects of higher US rates and a stronger US dollar sparked capital outflows.
According to DBS Group Research, Japanese investors are allocating more capital to South-east Asia, where foreign direct investment flows to six Asean states, including Singapore, have averaged US$20 billion a year for the past five years, except 2012. This compares with annual flows of US$7 billion to $10 billion from 2006 through 2010.
Strengthening Asian currencies have helped lift assets, a turnaround from last year. The Singdollar has appreciated 3.8 per cent against the greenback so far this year, while the Malaysian ringgit has appreciated 5.4 per cent. The rupiah has gained 5 per cent and the Thai baht has risen 3.2 per cent.
Also lifting Asian stocks are rising oil prices. Brent crude hit a 2016 high of US$42.11 yesterday, up from US$41.54 on a weaker US dollar and after Opec officials suggested they could limit output even if Iran does not cooperate.
