Markets Insights

Traders await cues from US and China

Fed chief Janet Yellen getting ready to testify before the US House Financial Services Committee in Washington DC last Wednesday. She said a rate hike would be "the prudent thing to do".
Fed chief Janet Yellen getting ready to testify before the US House Financial Services Committee in Washington DC last Wednesday. She said a rate hike would be "the prudent thing to do".PHOTO: REUTERS

All eyes now on US Federal Reserve's possible rate hike next month

Investors here look set to take their cues from events in the world's two biggest economies this week.

In China, new data out yesterday showed exports in October fell for a fourth straight month, by 6.9 per cent, in the latest sign of the softening economy.

And in the United States, speculation over the timing of the impending interest rate hike will also occupy traders' minds, analysts said.

More corporate earnings reports will also be released.

On Friday, Wall Street reversed losses with a 0.26 per cent gain as traders received a confidence boost from the biggest monthly surge in non-farm payrolls this year.

NO SOFT SPOT

There's no soft spot in the economy, that's over. Things are tightening all around.

MR JOHN CANALLY, chief economic strategist at LPL Financial Corp in Boston

US Federal Reserve chair Janet Yellen had said last Wednesday that the possibility of raising interest rates in December is still on the table, and that the move would be "the prudent thing to do".

Mr John Canally, chief economic strategist at LPL Financial Corp in Boston, told Bloomberg: "People need to prepare for a December rate hike. I'd expect the probability of a December liftoff to go to the low 90s, unless something really bad happens between now and then. There's no soft spot in the economy, that's over. Things are tightening all around."

At home, the Straits Times Index on Friday slid 13.18 points, or 0.44 per cent, to 3,010.47, weighed down by the possibility of a December rate hike in the US.

But for the week, it climbed 12.12 points or 0.4 per cent.

Remisier Desmond Leong noted that while trading through the week had been quite volatile, there have been encouraging signs of market sentiment picking up.

"There is buying opportunity and people are buying, which is a good sign," he said, adding that the rebound in October could also have suggested that the market has "already based out for the near term".

"I'm a little more bullish (on the index) now. It's likely to go sideways or up slightly from here."

Mr Leong noted last week's earnings reports generally came in within expectations, with "no big shocks".

DBS Group Holdings last Monday posted a healthy 6 per cent growth in net profit to $1.07 billion for the third quarter to Sept 30, beating market forecasts. But the stock ended the week 11 cents or 0.63 per cent lower at $17.40, as analysts expressed concerns over the broader outlook for local banks given the imminent rise in interest rates.

OCBC Bank and United Overseas Bank had both reported lower earnings in the previous week.

Real estate giant CapitaLand rose three cents or 0.94 per cent to $3.23 on Friday, after announcing earlier that its third-quarter net profit surged 48.3 per cent to $192.72 million, while aerospace and defence conglomerate Singapore Technologies Engineering slipped eight cents or 2.42 per cent to $3.22, despite logging a 9.9 per cent rise in net profit to $133.3 million.

Outside of the blue chips, Singapore Post was flat at $1.895, even after logging a 38.5 per cent jump in net profit to $53.4 million, while Yeo Hiap Seng slid half a cent or 0.38 per cent to $1.33 despite net profit having almost tripled to $9.4 million thanks to currency gains.

Budget carrier Tiger Airways surged 10 cents or 32.3 per cent to 41 cents, after Singapore Airlines (SIA) launched a voluntary conditional general offer for the firm's remaining shares with the aim of delisting and privatising it. SIA owns 55.8 per cent of Tiger Airways, which is valued at about $1.02 billion.

Mr Leong said investors will likely continue to look out for the next move coming from the US, given that "everybody globally is looking there now, while China has taken a bit of a backseat".

Closer to home, companies announcing their earnings this week will likely drive the market as well.

"But I don't think the numbers going forward will be fantastic," he added. "Earlier we just dodged a technical recession by a hairline. It's not just us, it's China and everywhere else as well."

The market will be closed tomorrow for the Deepavali holiday.

A version of this article appeared in the print edition of The Straits Times on November 09, 2015, with the headline 'Traders await cues from US and China'. Print Edition | Subscribe